SENIOR PLC
ANNUAL REPORT
& ACCOUNTS 2021
CONTENTS
FINANCIAL HIGHLIGHTS
Group at a Glance
Chair’s Statement
Group Chief Executive Officer’s Statement
STRATEGIC REPORT
IFC Financial Highlights
1 Our purpose
2
4
6
12 Sustainability
Environment
14
TCFD
18
Social
24
28
Governance
30 Our Business Model
32
Investment Case
34 Strategic Priorities
36 Our Technology Themes
38 Our Technology & Product Development
40 Stakeholder Engagement
44 Section 172 Statement
46 Key Performance Indicators
48 Risks and Uncertainties
56 Divisional Review – Aerospace
58 Divisional Review – Flexonics
60 Financial Review
64 Viability Statement
GOVERNANCE
65 Chairman’s Governance Letter
68 Board of Directors
72 Executive and HSE Committee
73 Governance and Report of the Directors
76 Nominations Committee Report
80 Audit Committee Report
87 Remuneration Report: Annual Statement
90 2021 Remuneration Report at a Glance
92 Remuneration Report: Policy
98 Annual Report on Remuneration
108 Statement of Directors’ Responsibility
109 Independent Auditor’s Report to the
Members of Senior plc
FINANCIAL STATEMENTS
116 Consolidated Income Statement
117 Consolidated Statement of Comprehensive Income
118 Consolidated Balance Sheet
119 Consolidated Statement of Changes in Equity
120 Consolidated Cash Flow Statement
121 Notes to the Consolidated Financial Statements
156 Company Balance Sheet
157 Company Statement of Changes in Equity
158 Notes to the Company Financial Statements
163 Five-year Summary
ADDITIONAL INFORMATION
164 Group Undertakings
166 Additional Shareholder Information
167 Officers and Advisers
Revenue
-10%
£658.7m
2020 – £733.6m
Adjusted operating margin(1)
+40 bps
0.9%
2020 – 0.5%
Adjusted loss before tax(2)
Profit/(Loss) before tax
£(1.9)m
2020 – £(6.2)m
£23.7m
2020 – £(191.8)m
Adjusted earnings/(loss)
per share(3)
Basic earnings/(loss)
per share
0.17p
2020 – (0.84)p
5.82p
2020 – (38.20)p
Return on capital employed(4)
+50 bps
Dividend per share
nil %
1.0%
2020 – 0.5%
Free cash flow(5)
£14.0m
2020 – £46.5m
nil p
2020 – nil p
Net debt(5)
£53m reduction
£153.1m
2020 – £205.9m
NON FINANCIAL HIGHLIGHTS
CDP
(climate disclosure project)
A-
Total Carbon Dioxide Emissions
(tonnes CO2 equivalent emitted)
46,540 tonnes
Leadership rating
“Implementing best practices”
2020 – 46,747 tonnes
(Scope 1, Scope 2 -market based and Scope 3)
Lost time injury rate
(per 100 employees)
0.32 incidents
2020 – 0.32 incidents
Women in leadership
Board of Directors
50%
2020 – 43%
Engagement survey
(percentage of employees
completing the survey)
81%
Waste recylced
93%
2020 – 93%
Executive Committee
38%
2020 – 38%
Ethics
(percentage of employees who completed
Annual Code of Conduct Training)
94%
2020 – 64% (Global Covid employee survey)
2020 – 94%
Our purpose is to provide
safe and innovative
products for demanding
thermal management
and fluid conveyance
applications
Read more
about the
progress we
are making on
our purpose on
Pages 4, 12,
34, 36 & 38
Read more
about our
people and
culture on
Pages 12, 24,
31, 35 & 41
Read more
about our
investment case
Page 32
Read more
about our
strategic priorities
Page 34
Read more
about how we
are performing
in Aerospace
Page 56
Read more
about how we
are performing
in Flexonics
Page 58
Adjusted operating profit and adjusted loss before tax are stated before £nil amortisation
of intangible assets from acquisitions (2020 – £7.7m), £4.4m net restructuring income
(2020 – £39.0m net restructuring cost) and £nil goodwill impairment and write-off
(2020 – £134.3m). Adjusted loss before tax is stated before income associated with
corporate undertakings of £21.2m (2020 – £4.6m cost). Adjusted earnings/loss per share
is stated before exceptional non-cash tax credit of £0.6m (2020 – £nil).
EBITDA is defined as adjusted loss before tax, and before interest, depreciation,
amortisation, and profit or loss on sale of property, plant and equipment. It also excludes
EBITDA from disposed businesses and is based on frozen GAAP (pre-IFRS 16).
This measure is used for the purpose of assessing covenant compliance and is reported
to the Group Executive Committee.
(1) Adjusted operating margin is the ratio of adjusted operating profit to revenue.
A reconciliation of adjusted operating profit to operating profit/loss is shown in Note 9.
(2) A reconciliation of adjusted loss before tax to profit/loss before tax is shown in
Note 9.
(3) A reconciliation of adjusted earnings/loss per share to basic earnings/loss per
share is shown in Note 12.
(4) See page 47 for the derivation of return on capital employed.
(5) See Notes 47 and 32c for the derivation of free cash flow and of net debt
respectively.
The US Dollar exchange rate applied in the translation of revenue, profit and cash
flow items at average rates for 2021 was $1.38 (2020 – $1.29). The US Dollar
exchange rate applied to the balance sheet at 31 December 2021 was $1.35
(31 December 2020 – $1.37).
Cautionary statement
The Annual Report & Accounts 2021 contains certain forward-looking statements.
Such statements are made by the Directors in good faith based on the information
available to them at the date of this Report and they should be treated with caution
due to the inherent uncertainties underlying any such forward-looking statements.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
1
GROUP AT A GLANCE
Our vision is to be a trusted and collaborative high value-added
engineering and manufacturing company delivering sustainable
growth in operating profit, cash flow and shareholder value.
Our purpose is to provide safe and innovative products for
demanding thermal management and fluid conveyance applications.
The Group aims to create long-term sustainable growth in shareholder value through a culture that
empowers operations to work autonomously and collaboratively within an effective control framework.
OUR BUSINESS DIVISIONS
Aerospace
Providing high technology products and
systems for demanding applications in civil
aerospace & defence and adjacent markets.
The Aerospace portfolio spans a wide
range of fluid conveyance and thermal
management components and sub-
systems, as well as complex structural
parts and assemblies, for fixed-wing and
rotary aircraft, aero-engines, spacecraft
and a variety of other industrial applications.
Read more about Aerospace on page 56
66%
(2020 – 70(1)%)
Civil Aircraft
Military/defence
aerospace
Other aerospace
division
37%
18%
11%
Flexonics
Providing high technology products
and systems for demanding applications
in land vehicle, power & energy and
adjacent markets.
The Flexonics portfolio spans a wide
range of fluid conveyance and thermal
management components & sub-systems,
as well as complex precision machined
parts, for conventional and advanced land
vehicle propulsion systems, petrochemical,
renewable energy and a variety of other
industrial applications.
Read more about Flexonics on page 58
34%
(2020 – 30(1)%)
Land vehicles
18%
Power and energy 16%
(1) This number excludes Senior Aerospace Connecticut
Fluid conveyance systems
Design and manufacture:
Gas turbine engines
• Precision-machined and
• high-pressure and low-pressure
ducting systems
(metal and composite)
• control bellows,
sensors and assemblies
Structures
• Precision-machined airframe
components and assemblies
fabricated engine components
(rotating and structural)
• Fluid systems ducting and
control products
Read more on pages 36 to 39
2
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
Land vehicle emission
control
• Exhaust gas recycling coolers
• Fuel mixing and distribution
systems
• Flexible couplings
Industrial process control
Design and manufacture:
• Engineered expansion joints,
dampers and diverters
• Flexible hose assemblies and
control bellows
• Fuel cells and heat exchangers
• Precision-machined components
Read more on pages 36 to 39
STRATEGIC REPORT OUR PEOPLE WORLDWIDE
North America
UK and Europe
43%
34%
Asia
Rest of the world
20%
3%
Read more about our people and culture on page 24
Our Values set out the
principles and standards
of behaviour that drive
our culture.”
David Squires
Group Chief Executive Officer
Worldwide operating
businesses
26
Countries
12
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
3
CHAIR’S STATEMENT
Resilient in a challenging year
STAKEHOLDER ENGAGEMENTS
The long-term success of the Group is
enabled by mature and progressive
engagement with all of our stakeholders.
A key priority for the Group is ensuring
that their viewpoints are fully considered
when assessing the impact of our
decisions and strategies.
Pages 40 to 43 explains more on this
SUSTAINABILITY PROGRAMME
A commitment to sustainability underpins
our purpose, and is a key objective of the
Executive and the Board. Our programme
is well defined and being delivered.
Our progress is measured by metrics,
targets and an annual scorecard.
Read more on pages 12 to 29 on the scorecard
and progress achieved to date.
2021 has been a challenging year,
given the external global environment
we have had to address
There are a number of aspects of the year
I would like to draw out:
• the performance and behaviours of the
team has been exemplary during this
unprecedented challenging period. Our
people and their personal safety have been
paramount in all we do;
• the restructuring, announced in 2019,
has been completed and was thoughtful,
comprehensive and incisive. No stone was
left unturned but we were careful to preserve
organisational capability for the recovery
to come. We can already see the benefits
of the action on the flow through margins
of the business as volumes increase;
• we tested our end markets and strategies
for the group against reasonable assumptions.
We determined that our capabilities, market
positions and technology are applicable
to the net zero world we are increasingly
operating within;
• we held a Capital Markets Day (“CMD”)
presented by key business and technical
leadership from across the Group to
showcase our strategies and capabilities.
It was rewarding to see the support and
engagement from our shareholders at
the session;
• our sector-leading sustainability credentials
and actions of the Group have always been
strong and Executive driven. Progress and
drive have been sustained by the Executive
throughout this period; and
• how we execute our business and the
nature of our business strategies are
interlinked and synergistic.
The Board has a very strong understanding of
the business model and its intrinsic cash flows.
In the first half of 2021, Senior encountered
corporate action in the form of a conditional
proposal from LSF XI Investments, LLC,
a company advised by Lone Star Global
Acquisitions, Ltd. The Board, fully aware of
its fiduciary responsibilities, and together with
its advisers, assessed the fundamental value
of the Company in relation to the proposals.
Having carefully considered the offers, the
Board unanimously rejected them on the basis
they fundamentally undervalued Senior and
its future prospects.
The Board was able to make a unanimous
decision as we are confident that we have
a strategy that will maximise value for
shareholders and deliver its target return on
capital employed of a minimum of 13.5%
(post IFRS 16) over the medium term.
Continued recovery in the Group’s end markets,
combined with our strong operating leverage
and augmented by the benefits from the
restructuring programme, are foundations of
our confidence about our prospects. Our end
markets positions, capabilities, technologies and
trusted relationships forged with our customers
enable us to help them meet today’s challenges
and deliver solutions for future low carbon
requirements. The balance sheet remains robust
and was further strengthened by the divestiture
of Senior Aerospace Connecticut. We remain a
well-capitalised Group, with intrinsically strong
cash flows and businesses that have capacity
to benefit from end market recoveries.
The Company’s strategy continues to provide
a solid foundation to support our future growth
aspirations. When looking forward across the
portfolio, our businesses manufacture highly
engineered products and systems with
applications aligned to the low carbon economy.
These are pivotal technologies for emissions
reduction and environmental efficiency.
We have identified significant current and
future opportunities for the Group in fluid
conveyance, thermal management and structural
components. These capabilities continue to be
highly relevant as the world transitions towards
a low carbon economy. Our products and
capabilities are relevant today and for the
longer term.
The Board has and will continue to evaluate
and review the portfolio within the Group. The
Defence document issued on 22 June 2021
continues to best express the Boards position.
Our performance
In 2021, the Board and the Executive team
continued to be flexible and adaptive to the
dynamics the Company was facing. As in 2020,
they illustrated that they could function well
during the challenging times of the pandemic.
The decisive actions taken to manage costs
has delivered savings of £50m realised in 2021.
These actions have meant that we are now an
even leaner and more efficient business and
we expect to see healthy near-term operating
leverage across the Group’s operating business
as sales recover.
The Group generated a free cash inflow of
£14.0m. The Group balance sheet remains
robust, with adequate headroom to our
committed facilities. We have well-structured
financing arrangements in place and supportive
lenders, who agreed appropriate covenant
relaxations to December 2021, though our
strong cash performance in 2021 meant that
we did not need to utilise those facilities.
While Group performance in 2021 has improved
compared to 2020, it was still impacted by the
pandemic, and as such, the Board believes it is
not appropriate to pay a final dividend for the
year. The Board are optimistic that the recovery
currently underway in our core markets will
continue and therefore we currently expect to
resume dividend payments in 2022. We will
continue to follow a progressive dividend policy
reflecting earnings per share, free cash flow
generation, market conditions and dividend
cover over the medium term.
4
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
STRATEGIC REPORT
The long-term success of the Group is enabled by mature
and progressive engagement with all of our stakeholders.”
Ian King
Chair
The Corporate Governance Report (pages 65
to 108) examines how the Board sets the tone
from the top of the organisation. We continue
to ensure the health, well-being and safety
of our employees is a priority and that our
operations conduct themselves with integrity
and in an ethical, sustainable and socially
responsible manner. The Group is focused on
a set of non-financial metrics which range from
diversity, to greenhouse gas emissions, to water
consumed and how much waste is recycled
in the businesses. The Sustainability Report
on pages 12 to 29 looks at how Senior has
achieved significant improvement against
our non-financial targets in 2021.
Looking forward
Despite the ongoing challenges in 2021 and
notwithstanding near-term uncertainties in the
global economy, Senior is well placed to benefit
from the recovery underway in our end markets.
The Group also has multiple opportunities to
leverage its capabilities and technology as the
world transitions to a low carbon economy
On behalf of the Board, I would like to thank all
of our people for their substantial contribution
to Senior over the last year. I would also like to
extend this to all of our stakeholders for their
continued support.
As we enter 2022, we will continue to focus
on delivering our strategy. We remain well
positioned to deliver improved returns for
our shareholders over the medium term.
Thank you all for your support.
Ian King
Chair
There are short- and long-term incentive
schemes that ensure the team at all levels
of the Group are focused on delivery of the
strategy for the benefit of our stakeholders.
Short-term incentive schemes deliver the
foundation for longer-term recovery. It is
fundamentally important, given the
decentralised structure of the Group, that
we have an integrated and consistent set of
targets applying to all members of the schemes.
Our incentive targets are stretching, and the
longer term targets reflect the Board’s view
of the medium-term prospects for the Group.
Our purpose
Our purpose is to provide safe and innovative
products for demanding fluid conveyance
and thermal management applications.
Our commitment to sustainability is rooted in
our core Values: it is highly complementary
to, and underpins, our purpose. As an
international, high value-added engineering and
manufacturing company, the Board recognises
the importance of adopting a market-leading
sustainability programme. We firmly believe
that our leadership in this area provides a
distinct commercial competitive advantage as
the world transitions to a low carbon economy.
Sustainability is an integral part of our strategy,
embedded within the behaviours of our people
and the culture of our organisation.
We provide products that operate in hard-to-
decarbonise sectors – such as aerospace,
transport and power. As an engineering
company with a strong heritage in relevant
domains created over almost 90 years,
innovation is in our DNA. We apply our
expertise and technology across many
different applications, working in close
partnership with our customers, to develop
solutions that support both their commercial
and sustainability objectives.
It is this relevant engineering expertise that
has given us an important role in helping
to tackle the climate change and clean air
challenge, as the world transitions to a lower
carbon economy.
In 2020 we became the first, and remain the
only, company in our sector to have its scope 1,
2 and 3 greenhouse emissions reduction targets
approved and verified by the Science Based
Target Initiative (“SBTi”).
Amongst other sustainability successes,
in 2021, we maintained our CDP leadership
rating of A- for our climate disclosure, which
is defined by CDP as “implementing current
best practices” and at the same time Senior is
described by CDP as “a trailblazer driving the
transition towards a sustainable net-zero future”.
Our Board
We have a cohesive, diverse and high
performing Board. Last year’s Board
Effectiveness review, given Celia Baxter’s
and Giles Kerr’s tenure, highlighted the need
to properly handle transition to maintain the
Board’s quality and standards. The Board felt,
recognising this, we should advance succession
planning and make sure there was more than
enough time to integrate the new Board. I am
delighted to say we are on plan with Mary and
Barbara, having joined the Board, and both
now embracing their personal integration plans
in 2022. Celia and Giles remain fully committed
as highly valued members of the Board.
We will recognise their contributions at the
appropriate time.
The Board has completed a comprehensive
Board evaluation during 2021. The main
recommendation centred around Board
succession, ensuring strategy form part of every
Board meeting agenda and that Directors have
good access to the Executive teams. Actions
are well underway to focus on these areas. To
find more detail on these improvements, please
refer to page 77 in the Governance section.
The Board and I continue to focus on our
responsibility to all of Senior’s stakeholder
groups – our employees, customers, suppliers,
communities and shareholders. We believe
that engaging with our stakeholders is key to
the long-term success of the Group. Over the
course of the year, in light of the corporate
activity, our communication and engagement
with shareholders increased. This year we
invited all employees to participate in our
global employee engagement survey. We had
excellent participation and engagement, and
feedback was very positive, valuable, and
constructive. Celia Baxter, together with our
Director of HR, Jane Johnston, participated in
employee engagement focused groups with our
UK operating businesses. This engagement has
given the Board valuable insight and feedback
which will help it implement specific continuous
improvement plans across the business.
Our intention is to run this global survey
every 18 months.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
5
GROUP CHIEF EXECUTIVE
OFFICER’S STATEMENT
It is heartening to see recovery
underway in our core markets including
civil aerospace and we anticipate
that continuing in 2022 and beyond.”
David Squires
Group Chief Executive Officer
HIGHLIGHTS
Revenue
£658.7m
(2020 – £733.6m)
Adjusted loss before tax
£(1.9)m
(2020 – £(6.2)m)
Adjusted earnings/(loss) per share
0.17p
(2020 – (0.84)p)
Overview of 2021 results
In 2021, Senior maintained a strong focus on
operational performance and delivered improved
profitability, robust free cash flow generation
and further strengthened the balance sheet.
This was despite the continued impact of the
coronavirus (COVID-19) pandemic on our
markets and customers.
With markets starting to recover, we saw order
intake increasing with a healthy book to bill ratio
of 1.16 for the Group, which underpins our
confidence in a return to growth in 2022, 2023
and beyond. We announced notable contract
extensions and new contract wins including
new orders with Boeing and Honda which
help to demonstrate Senior’s reputation as a
reliable and innovative supplier to our blue-chip
customer base: attributes which are highly
valued during the uncertain times through which
we and our customers have been navigating.
In our Post-close Trading Update on 14 January
2022, we reported that, for the full year, both
Group revenue and adjusted loss before tax
were in line with management’s expectations.
Group revenue was 6% lower than the prior
year on a constant currency basis, part of
which was pre-COVID-19 and included Senior
Aerospace Connecticut (which was divested
on 22 April 2021) for the full year.
In Aerospace, revenue declined 12% year-on-
year on a constant currency basis, reflecting that
part of 2020 was pre-COVID and 2020 included
a full year contribution from Senior Aerospace
Connecticut. Excluding Senior Aerospace
Connecticut, revenue for the full year on an
organic, constant currency basis declined by
7%. The year-on-year decline reflected the
reduction in civil aircraft production rates,
partly offset by growth from semi-conductor
equipment, defence and space markets.
(1) Adjusted loss before tax is before amortisation of
intangible assets from acquisitions, goodwill
impairment and write-off, net restructuring income/
costs and corporate undertakings.
6
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
In Flexonics, revenue grew 10% compared
to prior year, on a constant currency basis.
The performance in 2021 benefited from the
recovery in heavy-duty truck and off-highway
and passenger vehicle markets, partially offset
by a decline in oil & gas and the closure of the
Senior Flexonics business in Malaysia.
We measure Group performance on an
adjusted basis, which excludes items that do
not directly reflect the underlying in-year trading
performance (see Note 9). References below
therefore focus on these adjusted measures.
The decisive actions taken by the Group on
managing costs in 2021 have delivered
significant benefits and improved profitability.
This has helped us to generate an adjusted
operating profit of £6.1m (2020 – £3.7m),
despite the reduction in Group revenue.
Savings of £50m were realised in 2021. The
Group’s adjusted operating margin increased
by 40 basis points, to 0.9% for the year.
Adjusted loss before tax reduced to £1.9m
(2020 – £6.2m loss). The adjusted tax credit was
£2.6m (2020 – £2.7m). Adjusted earnings per
share increased to 0.17 pence (2020 – adjusted
loss per share of 0.84 pence).
Reported profit before tax was £23.7m
(2020 – £191.8m loss). Basic earnings per share
was 5.82 pence (2020 – basic loss per share
of 38.20 pence).
Maintaining a strong focus on cash generation
throughout 2021, the Group delivered free cash
flow of £14.0m (2020 – £46.5m). Our diligent
management of working capital and capital
expenditure have benefited this year’s free cash
flow and net debt position. Gross investment in
capital expenditure was £21.3m (2020 –
£26.8m) and the Group incurred £2.6m cash
outflows (2020 – £32.3m inflows) from working
capital. Reflecting the actions taken, the Group
generated net cash flow of £57.7m (2020 –
£23.2m) in the year, due to free cash flow of
£14.0m (2020 – £46.5m) and £43.7m cash
inflows (2020 – £23.3m outflows) primarily
related to corporate undertakings and
restructuring activity.
STRATEGIC REPORT
The Group’s financial position remains resilient,
with £208.0m of headroom on our committed
borrowing facilities at 31 December 2021.
Net debt at the end of December 2021
was £153.1m (including capitalised leases
of £73.2m), a reduction of £52.8m from
December 2020, after taking into account
favourable currency movements of £0.7m
and £5.6m increase for lease movements.
Considered and effective capital deployment is
a strategic priority for the Group and, in line with
our strategy to review the overall portfolio of our
businesses and evaluate their strategic fit within
the Group, on 22 April 2021 we completed the
divestiture of our Senior Aerospace Connecticut,
USA, operating business. The net proceeds for
this divestiture were £49.7m. As previously
announced, in 2021, we closed our small oil
& gas operating business in Malaysia, Senior
Flexonics Upeca, and also our Senior Aerospace
Bosman operating business in the Netherlands
following the seamless transfer of production
from Rotterdam to our French Aerospace sites.
While Group performance in 2021 has improved
compared to 2020, it was still impacted by the
pandemic, and as such, the Board believes it is
not appropriate to pay a final dividend for the
2021 financial year. We are optimistic that the
recovery currently underway in our core markets
will continue and therefore, we currently expect
to resume dividend payments in 2022. We will
continue to follow a progressive dividend policy
reflecting earnings per share, free cash flow
generation, market conditions and dividend
cover over the medium term.
Delivery of Group Strategy
Senior has a focused and compelling strategy
to maximise value for shareholders, and is
confident of delivering its target return on
capital employed of a minimum of 13.5%
(post IFRS 16) over the medium term through
the following:
• a strategic focus on intellectual property
(“IP”) rich fluid conveyance and thermal
management;
• organically growing our Aerostructures
business fully utilising our world class
global footprint;
• maintaining strong focus on efficiencies
through our Senior Operating System
as end markets continue to recover;
• executing on its portfolio optimisation
strategy to maximise value creation; and
• driving intrinsic strong cash generation.
Senior has maintained its focus on IP-rich
technology and manufacturing, by developing
expertise in fluid conveyance and thermal
management technology and capabilities.
These capabilities are supported by a strong
body of design and manufacturing process
intellectual property and know-how. Using these
technologies and capabilities, Senior is able
to develop and supply proprietary products,
sub-systems and systems for our customers’
demanding applications across a range of
diverse and attractive end markets.
Across the portfolio, our businesses
manufacture highly engineered products and
systems with applications that incorporate
pivotal technologies for emissions reduction
and environmental efficiency. We have identified
significant current and future opportunities
for the Group in fluid conveyance and thermal
management applications and these capabilities
continue to be highly relevant as the world
transitions towards a low carbon economy.
We have already developed novel solutions
for low and zero carbon applications and are
involved in a range of research and development
projects that support the drive for electrification
and hydrogen propulsion systems on land and
in the air. This is discussed further in the
“Technology and product design and
development” section below.
As well as our businesses being actively
focused on product offerings for the transition
to a low carbon world we continue to be actively
involved in making conventional technology
cleaner to bridge the gap between both worlds.
In addition, Senior’s end-markets are evolving
to reflect the global effort to achieve net zero
carbon emissions. Senior’s technology and
product roadmap is aligned to these trends
with a product development strategy that is
compatible with our focus on sustainability.
In addition to our fluid conveyance and thermal
management capabilities, we also have excellent
build-to-print precision machining and structural
assembly capabilities. These businesses focus
on a wide range of both complex airframe and
aeroengine applications. Examples include
compressor fan blades for multiple engine types,
wing ribs for narrow-body aircraft, complex
structures assemblies for wing and fuselage,
highly engineered engine casings and complex
machined products for satellites. Our Structures
businesses are well capitalised with state-of-the-
art equipment and operate across North
America, the UK and South-East Asia.
Our strategy for our Structures businesses
as we emerge from the pandemic is to focus
and drive:
• filling our existing capacity;
• pursuing some further diversification
into Space and Defence; and
• growing market share profitably
in Civil Aerospace.
We remain confident that our Aerostructures
core market will recover, driving performance
improvement and providing the Group with
strategic optionality.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
7
GROUP CHIEF EXECUTIVE
OFFICER’S STATEMENT
CONTINUED
Technology and product design and
development
We continue to invest in new technology
and product development in the areas of
fluid conveyance, thermal management and
Additive Manufacturing in support of our key
markets in Aerospace, Land Vehicles and
Power & Energy, as they transition towards
a low carbon economy.
Aerospace
• Our traditional fluid conveyance products are
entirely compatible with sustainable aviation
fuels, the increasing use of which will be the
fastest route to lowering aviation emissions.
• Our Additive Manufacturing capabilities
are enabling advances in complex product
design for improved performance and weight
reduction for the benefit of our customers.
• Our world-class capability in thermal
management and fluid conveyance provides
opportunities to support the development
of electric/hybrid air vehicle applications.
• We are leveraging and building upon our
long experience of providing hydrogen
fluid handling and distribution products for
industrial markets to support development
of both on-aircraft and off-aircraft hydrogen
technologies as this alternative propulsion
system evolves.
Land Vehicles
• Our current exhaust gas recirculation and
waste heat recovery products continue to
support evolving Land Vehicle propulsion
systems as they become more efficient
and lower their environmental impact.
• We focus on product offerings for the
transition to a low carbon economy and
engage with our customers’ new product
development programmes by providing
design and engineering support for cooling
and fluid handling solutions for batteries
and electronics on the growing number
of electric/ hybrid vehicles.
• We are supporting the development of
commercial vehicle hydrogen fuel cell
cooling and conveyance by capitalising
on our experience of producing hydrogen
fuel cell products in the energy sector.
Power & Energy
• We continue to develop an established wide
range of fluid conveyance products, bellows
and expansion joints for harsh environments
in carbon-free energy generation, including
solar farms, wind power plants, hydroelectric,
geothermal, fuel cell and nuclear power
applications.
• Our extensive experience of providing
fluid conveyance products for demanding
environments, and, specifically, hydrogen
fuel cell cooling and conveyance, opens up
opportunities in hydrogen production and
infrastructure applications.
Portfolio optimisation
The Group actively reviews its overall portfolio
of operating businesses and evaluates them
in terms of their strategic fit within the Group.
Senior has continued its “Prune to Grow”
strategy of portfolio optimisation by divesting,
closing, or combining non-core or performance-
challenged assets. Most recently in 2021 we:
• successfully raised £49.7m from the strategic
divestment of the Senior Aerospace
Connecticut helicopter structures business;
• realised value from the sale of the property
following the closure of our oil and gas
machining Senior Flexonics Malaysia facility,
which offset some of the closure costs; and
• completed the transfer of production from
the Netherlands to France and closed the
Senior Aerospace Bosman facility.
Senior understands the importance of
considered and effective capital deployment
to maximise shareholder value creation.
Expanding Senior’s high quality fluid conveyance
and thermal management businesses remains
an ongoing priority. Investments are supported
by a business case and are assessed using
a rigorous investment appraisal process.
We continued to make good
progress on our
sustainability goals,
maintaining our sector
leading position.”
David Squires
Group Chief Executive Officer
Restructuring
The decisive actions the Group took on
restructuring and cost management since 2019
have delivered the expected benefits, with
savings of £50m realised in 2021. In 2021, net
restructuring income of £4.4m was recognised
as our operating businesses maximised
opportunities to realise income from assets
that had no alternative use.
Since its inception in 2019:
• the cumulative cost of the programme has
been £46.7m, (£6m lower than initially
expected);
• cumulative cash outflow has been £19.0m,
(£10m lower than expected); and
• savings delivered of £4m in 2019, £36m
in 2020 and £50m in 2021 (a year earlier
than initially expected).
These decisive actions, taken to insulate the
Group through the pandemic in 2020 and 2021
mean that we are now an even leaner and more
efficient business.
8
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
STRATEGIC REPORT
SUSTAINABILITY
Senior is a values driven organisation: we
believe with conviction that how you do
business is every bit as important as what
you do. We always put safety and ethics
first and we strongly encourage and
promote diversity and inclusivity across our
international operations. For many years,
therefore, we have had a strong focus on
Environmental, Social and Governance
(“ESG”). As sustainability themes and issues
become ever more important to our
stakeholder groups, our strong track record
means that we are well positioned to meet
and exceed their ESG expectations.
Our industry leading ESG disclosures and
ratings are evidence of Senior’s longstanding
approach to sustainability.
In 2021, we have again made good progress
with our key sustainability metrics
and activities:
• Environment
– In 2020, Senior became the first,
and remains the only, company in the
Global Aerospace and Defence sector
to have its Scope 1, 2 and 3 greenhouse
gas emissions targets approved and
verified through the Science-Based
Targets Initiative (“SBTi”) and in 2021,
these are now verified “Near Term
Net-Zero Targets” in line with the
updated classification system.
– Maintained our CDP leadership rating of
A- for our climate disclosure, which is
defined by CDP as “implementing current
best practices”.
– Achieved the highest CDP leadership
– Donated £200,000 to UNICEF to support
its Covid-19 Vaccines appeal. Our donation
was the equivalent of providing
vaccinations for every Senior employee
and their families.
• Governance
– Updated the Group’s Code of Conduct
with a booklet issued to all employees
and provided training on it.
– Information security was a key area of
focus to safeguard the Group’s assets,
particularly as during the pandemic many
of the Group’s employees worked from
home. During the year, all staff received
training and regular reminders about the
risks related to information security and the
importance of awareness of matters such
as fraud, scammers and ransomware,
proper use of the internet and smart
downloading.
– Training on Anti-Money Laundering and
the Corporate Criminal Offence Act was
also rolled out to all relevant staff.
rating for the work with our supply chain.
Recently, Sonya Bhonsle, Global Head of
Value Chains & Regional Director
Corporations, CDP stated, “As a Supplier
Engagement Leader, Senior plc is a
trailblazer driving the transition towards
a sustainable net-zero future”.
– Reduced our SBTi Scope 1 and 2 (market
based) carbon emissions by 18.9%
compared to our 2018 base year.
– 36% of our electricity was sourced from
renewable energy, an increase from 25%
in 2020.
– Recycled 93% of waste produced.
• Social
– Achieved an 81% response rate on our
global employee engagement survey in
May 2021. This response rate exceeded
the benchmark for manufacturing
companies.
– Reduced the number of lost time injuries
from 21 in 2020 to 18 in 2021. We remain
on track to meet our 2025 reduction target.
– The percentage of women on the Board
increased to 50% in 2021 from 43%
in 2020.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
9
GROUP CHIEF EXECUTIVE
OFFICER’S STATEMENT
CONTINUED
MARKET OVERVIEW
Civil Aerospace (37%(2) of Group)
Production volumes for civil aerospace are
expected to be higher in 2022 than 2021, driven
by increasing single aisle rates.
Global air traffic recovery in 2021 showed
ongoing progress as the COVID-19 vaccine
delivery gathered pace and travel restrictions
eased globally: in North America, US domestic
travel recovered strongly; in the Asia Pacific
region we saw the start of the re-opening of
international travel in the second half of the year;
transatlantic travel opened up in November
2021; and there were signs of corporate travel
picking up. With travel restrictions being eased,
demand for air travel is increasing, driving the
recovery in air traffic and this is expected to
improve further through 2022.
The most recent IATA forecast is that world
passenger flows will return to 2019 levels by
the end of 2023. IATA expects domestic traffic
to reach 2019 levels by 2022 and international
traffic to return to 2019 levels by 2025.
As demand recovers, production of new aircraft
will be supported by the replacement cycle
driven by the retirement of older, less efficient,
aircraft. Beyond this, the drivers supporting air
traffic growth over the long term of c. 4% per
annum remain in place.
With our diversified product portfolio in the
aerospace sector, including attractive positions
across the newest generation of single aisle
aircraft platforms, Senior is well positioned to
benefit from the expected medium-term
market recovery.
Defence (18%(2) of Group)
Defence markets are anticipated to remain
stable in 2022.
Senior’s sales to the Defence sector are
primarily focused on the US defence market,
which in fiscal year 2022 is likely to be in the
region of $770 billion following the bipartisan
US Senate support for the National Defence
Authorisation Act (NDAA) in December 2021.
Senior is well placed with good content on
mature programmes such as the C-130
transport aircraft, the F-35 Joint Strike Fighter
as well as new programmes such as the
USAF T-7A Red Hawk trainer.
Other Aerospace (11%(2) of Group)
Sales from our Aerospace operating businesses
into end markets outside of the civil aerospace
and defence markets are classified under
“Other Aerospace” and include sales into
the space, semi-conductor equipment and
medical markets. Using our world class bellows
technology, we manufacture highly engineered
proprietary products to provide unique solutions
for semi-conductor manufacturing equipment.
The semi-conductor equipment market
continued to be strong in 2021, reflecting the
increase in global demand for microchips.
Robust consumer demand pushed double-digit
growth-rates, as a result of pandemic-related
consumer and work-from-home trends, and was
further strengthened by recovering industrial
markets such as automotive. According to
the World Semiconductor Trade Statistics
(“WSTS”), the global semi-conductor market
increased by 26% in 2021 and is forecasted
to grow by 9% in 2022.
Land Vehicle (18% of Group)
In Flexonics, Land Vehicle markets are expected
to continue to grow in 2022, as supply chain
constraints gradually ease through the year.
Americas Commercial Transportation (“ACT”)
Research reported that North American
heavy-duty truck production increased by 23%
in 2021. ACT Research is forecasting 2022
production to grow by 13% and envisage that
in 2023, production will increase by 21%,
supported by the pent-up demand from the
2021/22 period and pre-buy activity ahead the
tightening of emission standards. IHS Markit
Inc. (“IHS”) reported that European truck and
bus production grew by 14% in 2021 and is
forecasting that it will grow by a further 7%
in 2022.
Passenger vehicle production in 2021, especially
during the second half of the year, was impacted
by semi-conductor shortage. IHS reported that
European (including the UK) passenger vehicle
production decreased by 6% in 2021 and is
forecasted to grow by 20% in 2022.
According to the International Energy Agency
(“IEA”), in 2021, electric car sales more than
doubled to 6.6 million, representing close to 9%
of the global car market and more than tripling
their market share over two years. Furthermore,
all the net growth in global car sales in 2021
came from electric cars. With the increasing
adoption of electrification for both land vehicle
and stationary power applications continuing,
this market is fast growing and represents a
major opportunity for Senior in the medium
and long-term, particularly for our proprietary
battery cooling technology.
Power & Energy (16% of Group)
Some positive momentum is expected in power
& energy markets now that recovery in the
upstream oil & gas sector is underway.
Global oil demand is forecast to exceed
pre-pandemic levels before the end of 2022 and
to further strengthen in 2023, in the absence of
any further COVID-related disruption. Industry
macro fundamentals, for upstream oil and gas
in particular, are looking very favourable due to
the combination of projected steady demand
recovery, an increasingly tight supply market,
and supportive oil prices. Nevertheless, the rise
in geopolitical tensions could have a potential
impact on the supply side.
Global refining capacity, on the other hand,
fell for the first time in 30 years in 2021, as
new capacity was outweighed by closures.
We anticipate this stabilising in 2022
although dependent on geopolitical and
economic conditions.
In power generation, the IEA forecasts
electricity demand growing by 2.7% a year
on average in 2022-2024. It also forecasts an
acceleration in the growth of renewable capacity
in the next five years, accounting for almost
95% of the increase in global power capacity
through 2026.
We are ensuring we are appropriately resourced
to take advantage of the market recovery led
opportunities.
(2) This number is excluding Senior Aerospace Connecticut.
10
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
STRATEGIC REPORT ONGOING MARKET RECOVERY ACROSS THE
GROUP WITH STRONG OPERATING LEVERAGE
World passengers flows long run outlook
US defence spending continues to grow
World vehicles production forecast
World Energy Demand
Outlook
Overall, we are seeing recovery underway
in our core markets, including civil aerospace,
and we anticipate that continuing in 2022
and beyond.
While the impact of the pandemic and
industry-wide supply chain constraints are
still with us, we continue to manage these
diligently. The Board anticipates good
progress in 2022(3), in line with previous
expectations, as we continue the multi-year
recovery back to pre-COVID levels
of performance.
Over the medium-term we remain committed
to delivering a strong recovery across our
two Divisions, driving the Group ROCE to a
minimum of 13.5% in line with our previously
stated ambition.
Looking ahead, our differentiated offering in
fluid conveyance and thermal management
products coupled with our global footprint
and positioning in attractive and diverse
end markets, gives the Board confidence
that Senior is well positioned to build on our
strong capabilities and to capture growth
opportunities. Our continued investment
in low carbon technology and advanced
manufacturing combined with our
commitment to the highest sustainability
standards provide additional foundations
for continued success.
David Squires
Group Chief Executive Officer
(3) Currently assuming exchange rate for the US Dollar
to Pound Sterling of $1.34: £1 average for 2022.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
11
SOURCE: Data sourced from IHS Markit, Feb 2022. Million unitsLight VehiclesMedium/Heavy Commercial Vehicles201620152017201920182020202120222023202460657075808590951001050123456SOURCE: IATA, “Air Passenger Forecasts: Air passenger recovery to begin in earnest in 2022”, November 2021 (right).Global O-D passengers, billions2024: 105% of 2019 level2023: 98% of 2019 level2022: 82% of 2019 level2021: 45% of 2019 levelCAGR 2025-30: 4.8%2018203020282026202420222020July 2021 forecastNovember 2021 forecast0100200300400500600700800SOURCE: US Department of Defence, FY22 Budget Request, FY21 Green Book, Biden April 2021 budget request, Federal Government Budget, Roland Berger.Nominal DoD budget, USD bnFY22 likely outcome: c. USD 740-750 bnTrump FY22 plan: USD 722 bnBiden FY22 request: USD 715 bnObama presidencyTrump presidency20102011202320122013201420152016201720182019202020212022202420252026ActualExtrapolation based on Biden FY22 request4%2%SOURCE: IEA, “World Energy Outlook”, Oct 2021 – Describes the Announced Pledges Scenario, which assumes that all climate commitments made by governments around the world, including Nationally Determined Contributions and longer term net zero targets, will be met in full and on time.ElGt CO2202020102030204020500200400600800010203040CO2 emissions (right axis)Traditional use of biomassRenewablesNuclearNatural gasOilCoal SUSTAINABILITY
Read more on Environment page 14
Read more on Social page 24
Read more on Governance page 28
A COMMITMENT to sustainability is rooted
in our core Values: it is highly complementary
to, and underpins, our purpose. we believe
with conviction that how you do business
is every bit as important as what you do.
Sustainability is an integral part of our strategy, embedded
within the behaviours of our people and the culture of our
organisation. We invest in our employees to help them
succeed and they are empowered within a well-defined
governance framework.
For many years, therefore, we have had a strong focus
on Environmental, Social and Governance (“ESG”).
As sustainability themes and issues become ever more
important to our stakeholder groups, our strong track record
means that we are well positioned to meet and exceed their
ESG expectations. Our industry leading ESG disclosures and
ratings are evidence of Senior’s longstanding approach
to sustainability.
Our products operate in various hard-to-decarbonise sectors –
aerospace, transport and power. As an engineering company
with a strong heritage in relevant domains created over almost
90 years, innovation is in our DNA. We apply our expertise and
technology across many different applications, working in close
partnership with our customers, to develop solutions that support
both their commercial and sustainability objectives.
Our engineering expertise has given us an important role in
helping to tackle the climate change and clean air challenge,
as the world transitions to a lower carbon economy.
Learn more here
12
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
ADVANCED TECHNOLOGY
COLLABORATION FORUM
Senior’s Advanced Technology Collaboration
Forum underpins the identification and delivery
of technologies that will support our
Customers’ and Senior’s needs as we adapt
our existing capability to deliver sustainable
growth as clean energy solutions are
increasingly adopted. The purpose of the
Forum is to identify investment opportunities
in new technologies, and to support the
development of our Technology Roadmaps
through the delivery of targeted R&D projects
aligned to our purpose to provide safe and
innovative products for demanding fluid
conveyance and thermal management
applications. Key themes include:
• Developing products and capabilities for
Hydrogen applications in fuel cells,
infrastructure (electrolysers), propulsion
and land/sea transportation.
• Developing and implementing products
and capabilities for electric propulsion
applications in land vehicles, Urban Air
Mobility (“UAM”) and civil aerospace.
• Development of new thermal management
product lines for aerospace applications,
building on current automotive and
off-highway product expertise.
• Expanding the use of Additive
Manufacturing as an enabling capability
across all product groups.
WE HAVE AN INCLUSIVE CULTURE
WITH CONTINUED INVESTMENT IN
OUR EMPLOYEES
Attracting, developing and retaining the right
people is fundamental to our long-term success.
Personal and professional development of
people throughout our business is a key part of
ensuring we have talented, committed people
with the right skills and experience.
STRATEGIC REPORT Local management is empowered within
a well-defined governance framework that
emphasises safety, high ethical standards and
our Values, to embrace an entrepreneurial spirit
and foster an innovative and collaborative
approach with all our stakeholders.
DELIVERING SUSTAINABLE
SOLUTIONS
Our success is built on developing long-term
partnerships with our customers, which enable
us to help them meet today’s challenges and
deliver solutions for future low carbon
requirements. As the world transitions, Senior
is helping its customers to develop efficient and
effective products that are more sustainable,
with lower environmental impact.
We think ahead, looking at challenges
holistically when developing solutions
for customers. The best example of this is
our work to enable customer technologies on
existing internal combustion technologies while
simultaneously helping these same customers
bring to market efficient and viable electric and
hydrogen powertrains. Further to this, the same
intellectual property developments from the
transportation sector are being applied to
stationary and industrial power generation
applications which are playing a key part in
overall decarbonisation of the economy.
We adopt new, more sustainable
production methods and materials
wherever possible. For example, embracing
Additive Manufacturing allows us to develop
complex products quickly, with reduced waste
and often at a reduced weight when compared
to traditional manufacturing methods. Even
when Additive Manufacturing is not suitable, we
have a continual focus on improving production
efficiency, including reducing waste and the
consumption of electricity and water during
the manufacturing of the products. With
operations in 12 countries, we are also able to
be geographically close to major customers
which can contribute to minimising the carbon
footprint of our products.
BATTERY THERMAL
MANAGEMENT
One of the best examples of Senior’s
contributions to decarbonisation efforts
comes from a long-standing partnership with
an established industrial engine and power
solutions company. Building on a decades
long business relationship; Senior designs
and manufactures many key emissions
system components for their diesel engine
product lines in the areas of thermal
management and fluid conveyance.
Intellectual Property (IP) and experience
developed for these product lines have now
been directly leveraged to develop and
produce new product technologies for a zero
emissions future. Most notably, Senior
recently began volume production of an
advanced battery cooling module for
application in fully electric trucks and buses.
2021 Sustainability Progress
Environment
19%
Waste
93%
Reduction in Scope 1 (Direct) and Scope 2 (Indirect)
emissions from 2018 base year (2020 – 18.6%)
Recycling Rate
(2020 – 3%)
Diversity
50%
Engagement Survey
81%
Health and Safety
18
Lost time Injuries
(2020 – 21)
Ethics
94%
Percentage of women on Senior plc Board
(2020 – 43%)
Percentage of employees completing Employee
Engagement Survey (2020 – 64% response to
global Covid employee survey)
Percentage of employees who completed
Annual Code of Conduct Training (2020 – 94%
of global workforce)
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
13
SUSTAINABILITY
CONTINUED
THE ROUTE TO NET-ZERO
ENVIRONMENT
OBJECTIVE NET ZERO:
Senior is committed to
achieving Net Zero by 2050
CDP – Carbon Disclosure Project
Senior maintained a “Leadership” rating
of A- in 2021 from the globally recognised
CDP: the only UK company in our sector
to achieve a leadership rating. The
high-ranking score is a testament to the
importance we place on the environment
and communities in which we operate and
is a result of the continuing dedication of
our teams across our businesses to
reducing our environmental impact.
Senior plc received A-, which is in the
Leadership band and is defined as “implementing
current best practices”. This is higher than the
European regional average of C, and higher than
the Powered machinery sector average of C.
CDP Climate Disclosure Score
A-
LEADERSHIP RATING
Science Based Targets
In 2020, we were successful in having our
carbon emission reduction targets verified by
the Science Based Target Initiative (“SBTi”).
The SBTi is a partnership between CDP, the
United Nations Global Compact (“UNGC”),
World Resources Institute (“WRI”) and the
Worldwide Fund for Nature (“WWF”). The SBTi
call to action is one of the We Mean Business
Coalition commitments.
Launch of “20/20 Vision for
Sustainability” including
adopting climate targets for
carbon intensity, waste
recycling and water usage
2010
2015
2020
First submission
to Carbon
Disclosure
Project
“20/20 Vision for
Sustainability”
climate targets
achieved
In October 2021, the SBTi released guidance
on a science-based approach to Net Zero
emissions. A company reaches SBTi Net Zero
when it reduces emissions in line with keeping
global temperature increase to 1.5°C.
Senior remains the only company in the
global Aerospace & Defence sector to
have its emissions reduction targets
independently verified and approved by
the SBTi. The targets covering GHG emissions
from Senior’s operations are consistent with
reductions required to limiting climate warming
to 1.5°C. The Paris Agreement’s long-term
temperature goal is to keep the increase in
global average temperature to well below 2°C.
In the SBTi’s target assessment report, Senior’s
Scope 1 and 2 targets were considered
ambitious, as they track to a 1.5°C global
temperature increase. SBTi have approved
the following targets:
• Senior commits to reduce its absolute
Scope 1 and 2 GHG emissions by 30%
by 2025 compared to a 2018 base year
• For Scope 3 GHG emissions, Senior also
commits that 80% of its suppliers by
spend, covering purchased goods and
services and capital goods, will have
science-based targets by 2025.
Next Steps in our climate Journey
In 2022 we plan to extend our reach,
adding to our Near-Term Science Based
Targets by formulating Long-Term
Science Based Targets, the initial focus
will be our Scope 1 and 2 emissions,
Scope 3 will follow.
i
i
s
n
o
s
s
m
E
d
e
s
a
B
t
e
k
r
a
M
2
&
1
e
p
o
c
S
Progress towards our
certified Science Based Targets
Scope 1 and 2
We continue to monitor our Scope 1 and 2
emissions. All of our business operations
have programmes to increase energy efficiency,
typical projects include more efficient air
compressor systems, energy efficient boilers
and LED lighting.
In addition, we are actively pursuing the
purchase of low carbon electricity to reduce
our Scope 2 (market based) carbon emissions:
• in 2021, 36% of our electricity was sourced
from renewable energy, an increase from
25% in 2020.
We are on track to meet our SBTi Scope
1 and 2 (market based) 2025 target with a
19% reduction against our 2018 base year.
Scope 1 & 2 (Market Based) Emissions
60,000
57,418
56,992
46,747
46,540
50,000
40,000
30,000
20,000
10,000
0
2018
2019
2020
2021
Target
Total tonnes CO2e
Carbon emissions
(measured as Tonnes of CO2e)
Scope 1
10,414
10,378
8,731
8,445
Scope 2
(market based)
47,004
46,614
38,016
38,095
Total
57,418
56,992
46,747
46,540
2018
2019
2020
2021
14
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
STRATEGIC REPORT
Scope 1, 2 and 3
targets approved
by the Science
Based Targets
Initiative
Reassessment of
climate-related
risks and
opportunities
Senior’s 2021
CDP score A-
“Implementing
current best
practice”
Develop our
Long-Term Net
Zero Targets
2020
JULY
2020
DECEMBER
2021
JULY
2021
SEPTEMBER
2021
DECEMBER
2022
Gap analysis undertaken to
assess the Company’s
alignment to TCFD
recommendations and to
identify areas for improvement
Scenario analysis
undertaken
Senior achieves
“Supplier
Engagement
Leadership”
status from CDP
Scope 3
To make truly meaningful reductions in harm
to the environment, businesses must cascade
action down the entire supply chain.
In 2021, we commenced our work to achieve
our Scope 3 supplier engagement Science
Based Target.
We calculated that around 340 suppliers
account for 80% of our global spend.
This year we contacted all of these 340
suppliers to inform them of our Science Based
Targets and the approach we intend to take to
gather information from them.
In order to facilitate the data capture and to
ensure we were following best practice we
engaged CDP, joining their Supplier Programme.
CDP have a designated portal and we notified
suppliers asking them to provide data into
this portal.
For many of our suppliers, Senior was the first
customer to ask for detailed carbon emissions
data. This meant that we had to provide
assistance and expertise to help these suppliers.
Of the 340 suppliers, 94 completed a detailed
submission through this portal, helping us
to understand and assess how they
were progressing.
We believe this first year has been a successful
start to our programme and we continue to
develop our approach.
Supplier engagement
CDP have recognised our efforts in 2021 by
awarding us Supplier Engagement Leader
status based on our Supplier Engagement
Rating (“SER”)
Output from the CDP Supplier Portal estimates
that the targets set by our supply chain will give
an estimated saving of 43.1 million tonnes of
carbon per year.
Next steps
In 2022, we intend to increase participation
from our suppliers: to do this we will provide
more assistance and guidance principally
through virtual supplier group meetings.
Looking forward to 2023 we will extend
participation further by working more
closely with smaller suppliers to ensure that
we are on target to achieve the cascade of
carbon reduction into our supply chain in
line with our target to cover 80% of supplier
spend by 2025.
Task Force on Climate Related Financial
Disclosures (“TCFD”)
In addition to our operational climate disclosures
Senior is active in the requirements to disclose
in relation to the TCFD. The following section
covers our progress and disclosure for TCFD.
The companies with the best SER are
celebrated as Supplier Engagement
Leaders, which this year is comprised of
the top 8% of companies who disclosed
to the full climate questionnaire. These
companies are then included on CDP’s
Supplier Engagement Leader board, see:
https://bit.ly/SupplierEngagement2021.
In 2021, 94 of our key suppliers provided
information, 51% reported having active carbon
reduction targets with 43% reporting that they
engage with their own supply chain with
respect to carbon emissions.
Reporting Active Targets
51%
Suppliers Engaging
with their own
suppliers
43%
94
Suppliers submitted
detailed data to
Senior
Estimated Annual
CO2 savings
43.1M
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
15
SUSTAINABILITY CONTINUED
ENVIRONMENT CONTINUED
Waste
Our objective
Our Objective; 95% Recycling
Rate by 2025
To reduce the overall quantity
of waste generated and improve
the proportion of materials reused
and recycled.
Progress in 2021
In 2021, Senior were
successful in recycling
93%of waste produced.
In 2021, 74% of our businesses
achieved a recycling rate of
50% of our operating
businesses are at
90%
or higher.
100%
recycling rate.
Note: For information on hazardous waste, please see www.seniorplc.com/sustainability
Water Consumption
Our objective
To limit the environmental impact
of our production processes
through the efficient use of water.
We monitor water usage by business on a
monthly basis. Our businesses conserve
water by using efficient production methods
and by using water harvesting processes in
areas of water scarcity.
Progress in 2021
Water Usage in 2021
256 megalitres
Certification
Our objective
All Senior
businesses are
accredited to
ISO 14001
Reduction in usage of
86 megalitres
compared to 2019 – the last full
year before COVID-19 related
impact to operations
Senior 2025 Sustainability Targets
Metrics
Target Year 2025
Scope 1 and 2
Carbon Emissions
Direct GHG emissions
Indirect GHG emissions
(Combustion of fuel and operation of facilities)
Tonnes CO2e
30%
From 2018 base year
Scope 3
Indirect GHG emissions
Supplier
engagement
80% of suppliers by spend
will have climate science
based targets
Waste recycling
Reduce the overall quality of waste generated
and improve the proportion of materials
reused and recycled
% of waste
recycled
> 95%
Health and Safety
Reduced Lost Time Injuries
Lost Time Injury
Rate
<0.3
Lost Time Injuries and Illness
cases per 100 employees p.a.
16
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
STRATEGIC REPORT
Carbon emissions
Our objective
To reduce Scope 1 and Scope 2
emissions by 30% by 2025.
Key to this is the purchase of 100%
renewable electricity contracts.
Progress in 2021
Total gross Scope 1 and 2
(market based) emissions of
Scope 1 and 2 (market based)
emissions reduced by
Scope 1 and 2 (market
based) emissions reduced by
46,540tCO2e
in 2021
207tCO2e
in 2021
19%
against our 2018 base year
Carbon emmissions
In Compliance with Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 – Streamlined Energy and Carbon
Reporting (“SECR”)
1st Jan 2021 to 31st Dec 2021
1st Jan 2020 to 31st Dec 2020
Scope 1: Combustion of fuel and operation of facilities
Scope 2: (location based) Electricty, heat and steam purchased
for own use
Scope 2: (market based ) Electricty
Total gross Scope 1 and 2 (location based) emissions / tCO2e
Energy consumed in MWh to calculate above emissions
Scope 3: Business travel, waste, water
Total Gross emissions / tCO2e (Scope 2 location based).
Intensity measure / tonnes CO2 emitted per £m of revenue
Water usage (in megalitres)
Percentage of waste recycled or recovered
UK and
Offshore
1,244
2,203
875
3,447
17,171
53
3,500
34
37
100%
Global
excluding UK
and Offshore
7,201
36,040
37,220
43,241
126,996
1,118
44,359
80
219
89%
Total
8,445
38,243
38,095
46,688
144,167
1,171
47,859
73
256
93%
UK and
Offshore
1,267
Global
excluding UK
and Offshore
7,464
2,595
1,800
3,862
17,279
73
3,935
37
27
96%
36,683
36,216
44,147
129,273
907
45,054
72
214
90%
Total
8,731
39,278
38,016
48,009
146,552
980
48,989
67
241
93%
In Compliance with Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 – Streamlined Energy and Carbon Reporting (“SECR”)
Senior has set out its year 2025 plan to reduce
scope 1 and 2 emissions by 30%. Key to this is
the purchase of 100% renewable electricity
contracts. Three of Senior’s UK operating
businesses have now contracted into the supply
of 100% renewable electricity supply, avoiding
over 1,000 Tonnes of GHG emissions annually.
French and German operating businesses are
also supplied with 100% renewable energy.
Other Senior operating businesses continue to
make progress to achieving renewable energy
contracts and three more operating businesses
are confirmed to move to renewable energy
contracts in 2022.
Energy Efficiency Actions
In the reporting year, Senior plc has implemented
energy efficiency projects across the global
operating businesses. In total, Senior’s
improvements have the potential to reduce
GHG emissions by 1,200 tonnes of CO2e.
These environmental improvements include
the completion of a 5 kW solar panel installation
in Asia. Other improvements include the
upgrading of Liquified Petroleum Gas (“LPG”)
powered fork lift trucks to electric. Heating,
Ventilation and Air Conditioning (“HVAC”)
improvements continue to be completed in
several businesses reducing emissions by
switching to favourable refrigerants lower in
Global Warming Equivalent Values (emission
factors). Senior’s operating businesses continue
to install electric vehicle charging points for
employees and visitors, encouraging the use
of ‘zero emission’ transportation.
Methodology
The Group’s approach to calculating and reporting our
GHG emissions follows the Defra Guidance on how to
measure and monitor GHG emissions.
Three data sources used for GHG emissions;
1. UK Government GHG Conversion factors for company
reporting (DEFRA full set for advanced users 2021).
2. US EPA (eGRID) Emission factors for greenhouse gas
inventories for US electricity generation.
3. IEA (International Energy Agency) Emission factors year
2021 version.
2021’s reporting has incorporated Scope 2 greenhouse
gas emissions (associated with electricity consumption)
calculated using both the Location and Market-
based methods.
Each Senior business reports its environmental
performance monthly using the Group’s financial
reporting process.
The Scope 1 and 2 emissions are independently verified
in accordance with the International Standard on
Assurance Engagements 3410 ‘Assurance engagements
on greenhouse gas statements’ (ISAE 3410).
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
17
SUSTAINABILITY CONTINUED
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (“TCFD”)
The Financial Stability Board (“FSB”) created the TCFD – a framework to help
companies disclose climate-related risks and opportunities. We have made disclosures
consistent with the TCFD framework which recommends 11 disclosure topics across
four pillars – governance, strategy, risk management and metrics and targets.(1)
GOVERNANCE
Oversight of climate-related risks and
opportunities
The Company’s Board of Directors has oversight
over climate-related matters. The Group Chief
Executive Officer is ultimately responsible for
climate-related risks and opportunities.
Throughout the year, the Board was regularly
informed about climate-related issues affecting
the Group, as described below:
• the Group Chief Executive Officer provided
updates on the Group’s progress against
Scope 1 and 2 emission targets, work carried
out to support Scope 3 targets, waste
recycling and water use, as well as the effect
of climate change on the Group’s operating
businesses. The Group Chief Executive
Officer reports to the Board on other climate
matters discussed during the Executive
Committee and HSE Committee meetings.
• The Group Director of HSE & Sustainability
attended two Board meetings in 2021
and provided an in-depth review on the
progress in engaging with suppliers in
respect of the Group’s Scope 3 targets.
In addition, the Board received regular
progress updates on the implementation
of TCFD recommendations, including
Scenario Analysis.
• The Group Company Secretary ensured that
• The Group divisional CEOs and the Group’s
the Board was kept informed of the regulatory
developments around climate change,
providing various resources designed to
enhance climate change competencies of the
Board directors.
Director of Business Development & Strategy
attended the Board Strategy meeting,
highlighting the latest developments in low
carbon technologies and the opportunities
these presented for Group.
• The Group Director of Risk and Compliance
presents the Group’s principal risks, including
climate change, to the Board on a biannual
basis. In July 2021, the Group re-assessed its
climate-related risks and opportunities, and
the results of this assessment were reported
to the Executive Committee and the Board.
Senior’s climate-related governance framework
Board of Directors
Oversight of climate-related matters
Group Chief Executive Officer
Ultimate responsibility for management of
climate-related risks and opportunities
Executive Committee
Leading the Group’s efforts
on climate change
HSE Committee
Monitoring progress
on GHG emissions
(1) In October 2021, the TCFD released additional guidance implementing the Recommendations of the Task Force on Climate-related Financial Disclosures (2021 TCFD Annex),
which supersedes the 2017 Annex of the same name (2017 TCFD Annex). In line with the current UK Listing Rules requirements, our TCFD-aligned disclosures take into account
the implementation recommendations in the 2017 TCFD Annex. In addition, we have considered the 2021 TCFD Annex and applied it where possible.
18
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
STRATEGIC REPORT Assessing and managing climate-related
risks and opportunities
Management is responsible for assessing
and managing climate-related risks
and opportunities.
The Group Executive Committee, led by the
Group Chief Executive Officer, ensures that
material climate-related risks form part of the
Group’s overall risk management framework,
and that climate-related opportunities are
incorporated into the Group’s strategic and
financial planning. The HSE Committee, chaired
by the Group Chief Executive Officer, monitors
the Group’s progress on its environmental
targets, including Scope 1, 2 and 3 emissions.
Focus areas for 2022 “Governance”
• Continue strengthening Senior’s
governance framework for the Board’s
oversight of climate-related matters by
including “Climate Change” as a separate
regular agenda item in Board meetings.
• Enhance monitoring of the Group’s
progress towards Scope 1 and Scope 2
targets through carbon emissions
tracking dashboard.
• Continue raising awareness of climate-
related matters across the Group with
particular focus on operating businesses
and net zero transition plans.
BOARD TECHNOLOGY PRESENTATIONS
In September 2021, a presentation was
made to the Board, highlighting:
• the impact of technological changes,
particularly low carbon technologies,
on Senior’s market segments;
• initiatives by Senior’s customers
Senior will maintain regular technology
discussions at the Board level in 2022,
including those presenting climate-related
opportunities and mitigating climate-related
risks for the Group. Along with improving
awareness and expertise of technology issues
at the Board level, such discussions place
the Directors in a stronger position when
incorporating technology into strategic
planning and other major decisions such as
acquisitions, disposals and major investments.
demonstrating environmental awareness;
• technological developments in Aerospace
and Senior’s engagement in various
projects aimed at reducing emissions
and improving operational efficiency;
• decarbonisation opportunities for the
Flexonics Division, especially in relation
to Electric Vehicle (“EV”) adoption for
passenger cars and commercial vehicles;
and
• hydrogen infrastructure opportunities.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
19
SUSTAINABILITY CONTINUED
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (“TCFD”) CONTINUED
STRATEGY
Climate-related risks and opportunities identified over the short,
medium and long term
In considering climate-related risks and opportunities, Senior has
selected the following time horizons to align with the current Group
internal risk management and planning time frames:
Rating
S Short term
Range
2021 – 2024
M Medium term 2024 – 2026
L Long term
2026 – 2041
Climate change has been reported as one of the Group’s principal
risks since 2019. In 2021, we held an internal workshop to evaluate
climate-related risks and opportunities at a higher level of detail. We
have used comprehensive data sources for this review, such as climate
change-specific publications; relevant sector literature outlining the
potential impacts of climate change, including publications from peers,
investors, regulators and market stakeholders; guidance from the
TCFD on potential risks and opportunities for businesses; CDP risk
and opportunity disclosures from engineering sector companies.
The table below highlights the Group’s opportunities and material risks
before mitigation activities.
Category
Sub category
Risk/Opportunity Description
Opportunities
Products and
Services
Development of new products
Development or expansion of low emissions products resulting in increased demand
for Senior’s products
Transition
Risks
Market
Technology
Shift in Consumer preferences
Changing customer/consumer behaviour or preferences increases demand for
Senior’s products which support the transition to a low carbon economy
Changing customer/consumer behaviour or preferences
Customers may change demand to lower emissions products, as they adapt to a lower
carbon intensive economy. This might result in a reduction in demand for some of
Senior’s products.
Influence of ESG on debt-rating agencies/assessment of credit risk
Changes in investor expectation can change market valuations in a negative way
(such as attracting negative screening).
Substitution of existing products and services with lower emissions options
Failure to recognise and invest in changing and emerging (net-zero) technologies and
demand for low emission products may result in reduced market share and reduced
volume of sales.
Costs to transition to lower emissions technology
Decarbonisation of manufacturing processes and products away from fossil fuels
consistent with Science Based Targets may require additional investment of capital.
Unsuccessful investment in new technologies
Failure to invest in low emissions technology at the right time can lock the business
in to fossil-fuel reliant assets over the long term, or require additional investment costs
to pivot away from assets before the end of their useful life.
Policy & legal
Increased pricing of GHG emissions/cost of carbon offset
Pricing of GHGs may continue to be introduced in the future, which would increase
the cost of products/services both purchased and sold by Senior.
Reputation
Physical
Risks
Acute
Chronic
Exposure to litigation
Failure to manage climate related issues may result in prosecution (fines and
reputational damage).
Increased stakeholder concern or negative stakeholder feedback
Mismatch between Senior’s commitments/communication on climate change and
action may lead to dissatisfied customers and impeded customer loyalty, suppliers
and community members attracting negative press and reputational damage.
Stigmatisation of sector
Activism and protest against aviation, land vehicles and oil and gas market sectors
might become a threat to the reputation of Senior.
Increased severity of extreme weather events such as cyclones and floods
Extreme weather events may cause damage to infrastructure, equipment or product
stored within it and resulting in disruption to operations.
Changes in precipitation patterns and extreme variability in weather patterns
Increasing global surface temperatures and changing weather patterns may lead to the
increased intensity of droughts/water scarcity in some areas, impacting the supply of
water to Senior’s manufacturing sites and potentially disrupting operations.
Indicative
time frame
Link to Senior's
Principal Risks
S
S
M
L
M
M
M
M
L
M
M
S
S
Customer demand
and price down
pressure
Strategy and portfolio
management
Financing & liquidity
Innovation and
technological change
Inflation
Corporate
governance breach
Strategy and portfolio
management
Climate change
20
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
STRATEGIC REPORT
Impact of climate-related risks and opportunities on the organisation’s businesses, strategy and financial planning
Products and Services
We recognise that climate change is one of the megatrends transforming our business environment. Senior’s purpose is to provide safe
and innovative products for demanding thermal management and fluid conveyance applications. As our customers move to a lower carbon
environment, we help to develop products that are more sustainable, with lower environmental impact.
Read more on pages 12, 13, 36 and 38
Operations and supply chain
We are making progress against Science Based Targets set in 2020, as described on pages 14 to 17. In addition, a number of energy
efficiency projects implemented in 2021, and described on page 17, further improve climate resilience of our operations by reducing
their reliance on fossil fuels.
We acknowledge that physical risks (such as extreme weather events) and shifts in markets and technologies have the potential to
affect our operations and supply chain. Each site within the Group has a scenario-based Business Continuity Plan which is tested on
an annual basis.
In 2021, we worked with around 340 suppliers through Carbon Disclosure Project, asking them to align with Senior’s environmental
goals and set emissions reduction targets by 2025.
Read more on page 15
Investment in research and development
Senior’s Advanced Technology Collaboration Forum identifies investment opportunities in new technologies and supports with delivery
of targeted R&D projects that are aligned to the Company’s purpose.
Read more on page 12
Access to capital
In 2021, the Board agreed that a sustainability finance framework would be developed for Senior plc with the aim of working with the
Group’s lenders to support ESG linked debt when refinancing committed facilities.
Acquisitions or divestments
Portfolio optimisation is a central pillar of our strategy. We look to incorporate sustainability considerations when assessing strategic
acquisitions in our target areas of fluid conveyance and thermal management.
Financial planning process
We shall continue to develop our approach in assessing the financial impact of climate change. Actual and potential financial impacts on
revenues, expenditures, assets and liabilities, and capital and financing will be considered as part of the Group’s strategic and financial
planning processes.
Resilience of the organisation’s strategy
with reference to three climate-related
scenarios, including a 2⁰C or lower
scenario
In 2021, we carried out scenario analysis to
understand the potential impact of climate
change on the Group’s operations. We have
selected the three climate scenarios produced
by the Bank of England because:
• they meet TCFD recommendation to assess
business resilience at different climate-related
scenarios, including a 2⁰C or lower scenario;
• these scenarios are used by the Bank of
England to explore resilience of the UK
financial system to climate change;
• the scenarios are modelled to a thirty-year
timespan, out to 2050 to align to the Paris
Agreement and other net zero 2050 targets;
• they consider the macroeconomic impacts
with more granularity and within a more
applicable business context than climate
scenarios based on temperature increases;
and
• multiple high transition scenarios provide
diversity in stress test.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
21
SUSTAINABILITY CONTINUED
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (“TCFD”) CONTINUED
SCENARIO 1 (<2⁰C)
EARLY POLICY ACTION
– SMOOTH TRANSITION
• Decisive carbon action to reduce global
emissions starts in 2021;
• Carbon taxes and other policies intensify
gradually over the scenario horizon;
• Global warming is limited to 1.8⁰C by
SCENARIO 2 (<2⁰C)
LATE POLICY ACTION
– DISRUPTIVE TRANSITION
• Delay in implementing the policy required
to reduce global emissions by 10 years;
• Starting in 2031, significant and rapid
policy action causing drastic bending
of emissions trajectory globally;
2050 compared to pre-industrial levels;
• Global warming is limited to 1.8⁰C by
SCENARIO 3 (>3⁰C)
NO POLICY ACTION
– BUSINESS AS USUAL
• Governments fail to introduce further
policies to address climate change
beyond those already implemented;
• Increase in global temperatures reach
3.3⁰C by 2050 compared to pre-industrial
levels;
• Limited physical risks.
2050 compared to pre-industrial levels;
• High physical risks.
Potential impact
Policy changes start to accelerate, and
consumer and investor preferences evolve
rapidly to facilitate decarbonisation.
In the short and medium term, Senior
needs to ensure that its investment
decisions are consistent with its science-
based targets and deliver expected results.
In the long term, it is important to keep
pace with changing market demand for low
emission products and remain consistent
between Senior’s public commitments and
market expectations.
Opportunities
The ability to maximise returns on new
investments in the long term, once
transition has occurred and markets
have stabilised.
• Limited physical risks.
Potential impact
A sudden increase in the intensity of
climate policy in 2031, following an initial
period which is characterised by insufficient
or ineffective emission reducing policies.
Senior needs to ensure that it takes action
over this time period to avoid disruption in
the long term as mature economies make
rapid strides to cut emissions.
Opportunities
Early investment can set the Group up to
be ready for the swift changes to the
disrupted economy after 2030.
Opportunities may materialise over the long
term, due to the late policy action and the
abrupt transition to low carbon economy.
Resilience statement
The output of forward-looking scenario analysis allowed us to better understand how climate-
related risks and opportunities could impact our businesses. The assessment indicated that
transitional risks could have a more significant impact in scenarios 1 and 2, whereas the impact of
physical risks could be higher in scenario 3. We recognise that scenario analysis will be developed
over time, and we will continue to integrate the findings of more detailed climate-based scenario
analysis into Senior’s risk management framework to ensure that mitigation measures are in place
for any residual risks that could impact business resilience to climate change.
Senior’s commitment to the ambitious Science Based targets for 1.5⁰C future and Business
Ambition for 1.5⁰C Campaign demonstrates that we are aligning our strategy with transition to
a global net-zero economy. By taking action to reduce the greenhouse gas emissions within our
businesses and supply chain, we improve the efficiency of our assets, encourage carbon-free
technologies across the Group and our supply chain, therefore, reducing environmental impact.
We are committed to working closely with all our stakeholders in taking action to combat
climate change. We believe that the Group’s differentiators, such as its global footprint, focus
on innovation, strong relationships with customers and suppliers make it resilient in transitioning
to a low carbon economy.
22
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
Potential impact
Absence of transition policies result in a
growing concentration of greenhouse gas
emissions in the atmosphere.
Increased exposure to heatwaves, tropical
cyclones, droughts may increasingly provide
challenge for some of Senior’s sites and
supply chain.
With less policy action and investment
driving forward technology development,
the costs of transitioning to the new
technologies may be higher, the likelihood of
successful implementation, and the relative
rewards for the investment may be lower.
Opportunities
The Group’s continued investments and its
ability to diversify business activities can
help Senior be more resilient to changes
in the markets and adapt to the impacts
of climate change.
Focus areas for 2022 “Strategy”
• Conduct further scenario analysis
to understand the potential impact of
climate change at a regional/operational
site level.
• Embed the findings of the scenario
analysis into Senior’s strategic decision-
making and risk management processes;
continue testing the resilience of strategy
under different scenarios.
STRATEGIC REPORT RISK MANAGEMENT
The organisation’s processes for
identifying, assessing and managing
climate-related risks
Climate risks are identified, assessed and
managed using Senior’s risk management
process as shown on page 49. The Committee
of Sponsoring Organizations of the Treadway
Commission (“COSO”) enterprise risk
management integrated framework serves as
the foundation of the Group’s risk management
process, as tailored to reflect Senior’s culture
and values. The process includes identification
of relevant risks, risk scoring, development and
assignment of response actions, monitoring the
effectiveness of key mitigating controls and
reporting of the risk and assurance environment
to the Executive Committee, the Audit
Committee and the Board.
Three stages to identify significant
climate-related risks and opportunities –
methodology overview
Identification – comprehensive list of climate-
related risks and opportunities relevant to Senior
developed using following data sources:
• climate change specific publications and data;
• CDP disclosures from peers;
• relevant sector literature; and
• guidance from TCFD for Senior’s sector.
Significance assessment – material risks and
opportunities were identified by assessing and
scoring the following factors:
• likelihood;
• magnitude of impact;
• velocity of impact, if previously identified
as a principal risk by Senior; and
• strategic importance to the business.
Selection – a final list of material risks and
opportunities is selected for further climate
scenario analysis. Risk assessed is inherent,
without consideration for existing controls.
Mitigating action plans are developed for all
climate-related risks where the risk scoring
exceeds the Group’s tolerance level for that risk.
The action plans include a detailed description of
the response actions, assigned risk owners and
time horizons for completion of the mitigating
action plan. Action plan progress is tracked
to ensure timely implementation. The overall
effectiveness of the risk control environment
is closely monitored through assurance and
audit activities to assess if critical risks are being
mitigated within the Group’s risk tolerance.
Integration of processes for identifying,
assessing, and managing climate-related
risks into the organisation’s overall risk
management framework
Climate-related risks form part of the Group’s
risk register and will be subject to an annual
review by the Executive Committee and the
Board. Climate change has been reported as
one of the Group’s principal risks since 2019.
2021 assessment
During 2021, we re-assessed the climate-
related risks to understand which risks are
likely to be material across Senior’s entire value
chain, giving consideration to our operations,
suppliers, customers, as well as regulatory
and stakeholder expectations. The assessment
resulted in the development of a broad array
of response actions to support the Group’s
climate-related initiatives.
Focus areas for 2022 “Risk
Management”
• Due to the evolving nature of climate-
related impacts, we aim to conduct the
risks assessment process on a biannual
basis to track changes in materiality.
• Continue refining materiality process and
review emerging trends. Integrate this
process into Senior’s annual risk
management framework.
METRICS AND TARGETS
Metrics used to assess climate-related
risks and opportunities
Targets used to manage climate-related
risks and opportunities and performance
against targets
Read more on page 16
Scope 1, Scope 2, and, if appropriate,
Scope 3 greenhouse gas (“GHG”)
emissions
Read more on page 17
Focus areas for 2022 “Metrics and
Targets”
• Consider appropriate metrics and targets
relevant to the Company’s sustainability
strategy.
• Continue integrating the metrics into
business reporting processes.
• Develop the Company’s Net Zero
Transition Plan.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
23
SUSTAINABILITY CONTINUED
SOCIAL
Equality, diversity and inclusion
Our Core Values underpin our culture.
Senior promotes a culture and working
environment in which everyone can make the
best use of their skills, free from discrimination
or harassment. The value of “Respect and
Trust” defines how we treat people, and our
commitment to be open and straightforward
with colleagues, customers, suppliers and
other stakeholders. We recognise the benefits
of different perspectives and local cultures
and encourage individuals to speak freely,
as diverse contributions lead to better solutions
and business outcomes.
Senior’s leaders are committed to ensuring
equal opportunities, fairness of treatment,
work-life balance and the elimination of all forms
of discrimination in the workplace for employees
and job applicants. We aim to create a working
environment in which everyone can thrive,
achieve their full potential and contribute to the
success of Senior, and where all decisions are
based on skills and merit.
The Group’s Equality, Diversity and Inclusion
policy is contained within the Code of Conduct.
We expect people to treat everyone they meet
in the course of business with respect and
dignity and in support of this, during the year, all
employees undertook Preventing Harassment
and Promoting Respect training as part of our
annual, mandatory Code of Conduct training.
Employees are required to comply with the
Code of Conduct. The right behaviours are
underpinned by our Values, policies and
procedures that support our people processes
for example talent acquisition, succession
planning, promotions and learning and
development opportunities.
The Executive and business leaders continue
to focus on providing a diverse and inclusive
workplace. Gender diversity remains a key area
for further improvement in our operating
business general management population.
We are continuing our global participation in
Mission Gender Equity Mentoring (previously
the 30% Club cross company mentoring
scheme). The programme supports and
encourages the development of talented
women. The employee Engagement Survey
also provided us with the opportunity to
understand engagement by gender.
Participation in the survey was higher for
women than men, good levels of participation
being a measure of positive engagement. In
addition, it was notable that women scored
higher than men on their overall engagement
score, indicating that they feel that Senior is
a great place to work.
The table below shows the Group’s Board of
Directors, Executive Committee and operational
senior management in 2021 by gender.
In accordance with the Equality Act 2010
(Gender Pay Gap Information) Regulations 2017,
Senior publishes its Gender Pay Gap Report,
as required on the Company’s website.
All employees
Operational senior
management
Executive Committee
Board
Male
79%
82%
62%
50%
Female
21%
18%
38%
50%
We strive to reflect the diversity of the
communities we work in, at all levels across
our workforce. Senior is an equal opportunities
employer. The Board seeks to ensure a diverse
workforce that supports all employees,
irrespective of age, disability, gender
reassignment, marriage and civil partnership,
race, religion or belief, sex or sexual orientation.
We will not tolerate any form of unlawful
discrimination against our colleagues, or any
third parties be they potential employees,
customers, subcontractors, suppliers or
members of the public.
Employee engagement
As the impact of the COVID-19 pandemic
continued through 2021, we maintained our
focus on new ways of working, ensuring
effective communication and employee
engagement, while remaining COVID-19
secure and creating a safe and stable
environment for employees.
Building on the success of the global COVID-19
employee survey in 2020, we launched our
first global employee engagement survey in
May 2021. The survey was split into three main
sections, Engagement, Values, and Health
and Wellbeing, and was delivered electronically,
to all employees in multiple languages.
The response rate of 81% exceeded our
expectations and the benchmark for
manufacturing companies, with a significant
number of employees completing the survey
who do not have ready access to company
emails. The 81% response rate itself is a
positive indicator of engagement and our
employees desire to provide feedback.
SENIOR EMPLOYEE ENGAGEMENT
SURVEY RESULTS
Participation
Health and wellbeing
score (of a max of 10)
Engagement
score (of a max of 10)
Comments
81%
7.6
7.1
32,507
Values
Health and Wellbeing
Max Score: 10
1 Safety
Max Score: 10
5
6
4
1
3
2
2 Respect
and Trust
3 Integrity
4 Excellence
5 Cutsomer
Focus
6 Accountability
5
1
4
2
3
1 Social
Wellbeing
2 Physical
Wellbeing
3 Organisational
Support
4 Mental
Wellbeing
5 Health and
Wellbeing
24
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
STRATEGIC REPORT
Overall, the feedback was positive, with a
score of 7.4 for the question “Overall, how
satisfied are you working at Senior?”.
Other highlights included Management
Support, Peer Relationships, Goal Setting
and Meaningful Work. As expected, there are
areas for improvement. Across all of Senior, the
key themes for us to work on are enhancing
how the operating businesses communicate
their business strategy and mission, so that
people feel more inspired by what we do and
the value of their contribution. Reward was also
an area for improvement, both in terms of how
individuals are rewarded but also the process
for determining pay.
Feedback and high-level action plans have been
shared with the Board and, in particular, Celia
Baxter, the non-executive Director for employee
engagement, who has spent time reviewing and
analysing the feedback including engagement
scores and the verbatim comments.
Celia Baxter and Jane Johnston, Group HR
Director have resumed their programme of
face-to-face Focus groups and visited four UK
businesses, holding 15 sessions in the autumn
of 2021. The sessions were interactive with a
cross section of employees, including employee
representatives, and provided an opportunity
to engage directly, asking and responding to
questions. As well as holding the focus groups,
the site visits included factory tours and meeting
the leadership teams.
Our operations have remained vigilant in
communicating with their teams, in particular
focusing on different ways of engaging with
some employees working from home, and
leaders not being able to hold regular all hands
meetings due to Covid safe working protocols.
The methods for maintaining interaction and
providing information to employees onsite and
remote workers included, video messages,
utilising TV message-boards, increasing
newsletter frequency and using mobile
technology. Leaders ensured they were visible
in their businesses. In addition, we have been
encouraging employees and their families to be
vaccinated and have continued our support for
employees throughout the COVID-19 pandemic.
Health and Safety
The health, safety and wellbeing of our
employees is a core focus for Senior, the pursuit
of world class health and safety in all of our
undertakings is a recognised priority at all levels
of our business.
No work-related employee or contractor
fatalities occurred in the Senior Group in 2021,
no major injuries (serious / life changing) injuries
to employees or contractors working on behalf
of Senior.
In 2021, the Senior Group had a reduction in
the number of lost time injuries to 18 from 21
in 2020.
Senior has a Group-wide safety management
programme with all businesses complying to
the Group standard and all subject to an annual
audit. Seven of our business operations have
already transitioned from OHSAS 18001 to
ISO 45001.
In 2020, we set a Target to reduce our Lost
Time Injury Rate to 0.3 by 2025, we remain
on track to achieve this target.
Lost Time Injury Illness Rate (“LTIIR”) is defined
as the number of work-related lost time injury
or illness cases (losing more than one complete
shift) per 100 employees.
The Total Recordable Injury Illness Rate is
defined as the number of cases of lost
workdays, restricted work activities, job
transfers, medical care beyond first aid
and work-related illnesses expressed per
100 employees.
i
j
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t
s
o
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o
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u
N
GOLDEN RULES TRAINING
In 2021 we initiated a major safety
programme around the “Senior Golden
Rules”. The 10 Senior Golden Rules for Safety
cover key health and safety activities around
the major risks we face in the business.
These include lock-out / tag-out, working from
height and similar high-risk activities.
A team of health and safety professionals
from our global businesses collaborated
to take our existing Golden Rules programme
and significantly update and refresh the
content, producing training materials in all
applicable languages. A key component is to
align the Senior Essential Behaviours with our
Golden Rules. The roll-out of this programme
is scheduled for completion in 2022.
Number of lost time injuries
60
50
40
30
20
10
0
51
39
35
21
18
2017
2018
2019
2020
2021
Injury rate
The LTIIR for 2021 was 0.32, a similar result
to 2020 despite fewer injuries. This is a result
of the calculation being based on a reduced
headcount compared to 2020.
In terms of Total Recordable Injuries, we have
seen an increase in the calculated rate. As
activity levels increased during 2021, we have
experienced an increase in minor injuries; in
addition, as with LTIIR calculation, the figure
has been impacted by our reduced headcount.
s
e
i
r
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n
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N
2.0
1.8
1.6
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
1.78
1.69
1.48
1.09
1.17
0.66
0.50
0.44
0.32
0.32
2017
2018
2019
2020
2021
Lost Time Injury Illness Rate
Total Recordable Injury Illness Rate
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
25
SUSTAINABILITY CONTINUED
SOCIAL CONTINUED
I am delighted to have been able to visit some of our
sites and meet with employees to hear their feedback
and learn more about the culture across our businesses.”
Celia Baxter
Chair of the Remuneration Committee and designated NED for workforce engagement
People and Culture
Our Values set out the principles and standards
of behaviour that drive our culture. As evidenced
by the feedback we received from the
Engagement Survey, the area we scored
highest in was Safety. The safety and wellbeing
of our employees is a priority in everything that
we do, and our safety culture has been key
to how we have successfully managed the
business during the COVID-19 pandemic,
supporting employees through this difficult time.
In our autonomous and collaborative business
model, our operational business leaders are
empowered and accountable, setting the tone
for their operations. Our model has enabled
leaders to react to the ever-changing
environment we found ourselves in throughout
2021, taking measures to keep people safe,
maintain business continuity and to plan for
future recovery. Despite the challenges in 2021,
many of our businesses have continued to
support our employees, their families and
local communities, for example, with charity
events, fund raising and by facilitating COVID-19
vaccinations with onsite sessions and
transportation to vaccination centres.
Across Senior, we have
continued to provide
opportunities for learning and
development, meeting both
skills and technical training across the Group.
Our now well-established eLearning platform,
Learn has enabled us to offer a wide range of
training to meet business needs, for example
Operational Excellence, Management and
Leadership skills, Health and Wellbeing and
Project Management. Learn is also used to
deliver compliance training and, despite the
challenges posed by COVID-19 pandemic, we
have continued to deliver compliance training
for example our Code of Conduct, a programme
of Cyber Security courses and Anti Money
Laundering training. A significant proportion of
learning is on the job and our culture of sharing
knowledge and supporting colleagues is central
to developing technical competencies in our
operations. The feedback from the Engagement
Survey and focus groups confirms that peer
relationships are positive and that colleagues
can count on each other for support. This
feedback highlights our open and honest culture
of respect and trust, and how much people
value teamwork.
Communities
Across the world and in all parts of the
Group, Senior’s businesses undertake a
range of charitable activities to support the
communities in which they operate. Our
colleagues contribute their time, money
and effort in areas including educational
mentoring, encouraging the take up of
Science, Technology, Engineering and
Mathematics (“STEM”) subjects in schools,
helping support local sports teams and
partnerships with local charities.
As an advanced technology business, our
staff are highly trained leaders in their field.
Their knowledge and mentorship can
therefore be immensely valuable, and as
a Group we encourage and support our
colleagues in sharing their expertise and in
particular, enthusing the next generation
about the possibilities offered by science and
engineering. At Senior Flexonics Pathway, our
engineers volunteer across Texas schools and
support competitions to train young people
and help them start their journey into the
world of engineering. Qualified welders at
Flexonics Pathway volunteer at the Texas High
School Welding Series competitions, sharing
their knowledge and helping to judge weld
tests. Flexonics Pathway also held a welding
certification event at their facility, which saw
60 young people receive coaching and the
opportunity to try their hand at welding.
Elsewhere, in the UK Senior Flexonics Crumlin
has embedded itself in its local community
through shirt sponsorship for the Whitehead
RFC Under-9 rugby team, a youth team based
in Bassaleg, South Wales. Crumlin’s
contribution has ensured that the team has a
kit in which they can play in with pride, with a
squad of 20 young rugby players benefitting
from the business’ support.
At Senior India, meanwhile, the local team
partnered with the charity Anadi Seva Prakalp,
an organisation focused on improving the
quality of life for deprived senior citizens.
With Senior India’s help, Anadi Seva Prakalp
constructed a dining hall and kitchen at their
hospice near New Delhi, supporting the
charity’s core mission and the 37 senior
citizens living at the premises.
26
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
STRATEGIC REPORT
We have continued
to embed “Perform”,
our Performance and
Development system.
Perform provides a framework for managers
and team members to discuss feedback,
performance, behaviours linked directly to our
Values, set clear objectives, both business and
personal development and create development
plans. In addition, we continue to undertake a
robust succession planning review annually.
The Executive Committee scrutinises the talent
pipeline, identifying successors or interim cover
for key roles across the Group and ensuring
appropriate development plans are in place to
enable individuals to fulfil their potential. In 2021,
we have seen the positive outcome of this
process with three senior roles, including the
Director of Business Development and Strategy,
being filled by talented internal candidates
that were identified on the succession plans.
The Board reviews the succession plans for
the Executive Team and their direct reports
on a regular basis, with a special emphasis
on encouraging diversity and inclusion.
The feedback from our survey tells us that
employees believe that people are treated
fairly and that we do not tolerate misconduct.
When individuals have concerns, our culture
is to encourage open and honest feedback
on matters being raised with their local
management. On the rare occasion when
things cannot be resolved locally, we have our
third-party whistle-blowing service called Ethics
Point which along with our Code of Conduct,
was relaunched in 2021. All concerns raised are
investigated and learning points are actioned by
local leadership teams as appropriate.
During the year, we
have seen an increase
in recruitment activity
as business conditions
improve. In order to meet this and future
demand we are focussing on building strong
relationships with local technical colleges,
universities and education establishments,
partnering with recruitment firms, extending
our use of job boards and other approaches to
advertising and attracting applicants. In the US,
Recruit, our online recruitment system, has
placed us in a much better position to attract
talent by enhancing the candidate experience,
including the ability to use mobile devices to
apply. In 2022, we are planning a further roll out
of Recruit.
in support of
UNICEF
Senior is committed to supporting the fight
against the COVID-19 pandemic. Several of
our businesses have directly supported
vaccine rollout programmes in their local
communities and Senior plc has also donated
£200,000 to UNICEF in 2021 to support its
COVID-19 Vaccines appeal. Our donation will
help UNICEF to achieve its overall ambition to
vaccinate 70% of every country in the world
by the end of 2022. Our donation was the
equivalent of providing vaccinations for every
Senior employee and their families.
COVAX is the only truly global solution to
the pandemic because it is the only effort
to ensure that people in all corners of the
world will get access to COVID-19 vaccines,
regardless of their wealth. As a global
business and employer, Senior recognises that
this global action is of paramount importance
which is why we were delighted to hear that
as of February 2022, the COVAX Facility had
delivered a staggering 1.1 billion doses of
vaccine to 144 countries around the world.
Image: Wamala
UNICEF’s role in the fight against COVID-19
goes further than just delivering vaccines.
As well as helping UNICEF deliver vaccines,
our donation is also supporting the training of
health workers to safely carry out vaccination
campaigns, as well as providing access to
oxygen and other essential interventions to
help treat those suffering from the disease.
UNICEF is also delivering millions of items
of personal protective equipment to keep
frontline health workers safe whilst tackling
rumours and misinformation to boost vaccine
confidence. We are pleased to have had the
opportunity to help UNICEF in its support of
the vital global COVAX programme to deliver
vaccines to some of the most remote parts
of the world, save lives and protect entire
communities.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
27
SUSTAINABILITY CONTINUED
GOVERNANCE
Ethics Governance
Our Core Value of ”Integrity”
is essential to our success
Senior remains committed to the highest
standards of ethics, promoting the culture of
zero tolerance towards bribery and corruption.
Employees can give honest feedback, express
concerns if there are any practices that they
feel uncomfortable with allowing us to take
corrective actions when mistakes happen.
Our ethics and business conduct programme
commits us to conducting business fairly,
impartially and in compliance with local laws
and regulations and to acting with integrity
and honesty in our business relationships.
The programme is underpinned by the Code
of Conduct, which provides a clear framework
on which to base decisions when conducting
day-to-day business. It does this by:
• clearly setting out the behaviour expected
of all employees;
• providing guidelines which help employees
to apply our Values; and
• enabling employees to raise a concern or ask
a question if in doubt.
Acting ethically is fundamental to our business
success; it enables us to strengthen long-term
relationships and protect the Group’s reputation.
We use various forms of communication and
training materials, both in person and through
electronic media, to embed the ethics and
integrity requirement across the Group. We
investigate any alleged violations or complaints
and take the necessary action. A register of
reported incidents is maintained by the Group
Company Secretary and the Board receives
regular updates.
The Group recognises that the use of third-party
intermediaries can increase potential bribery and
corruption risks within the markets in which we
operate. All external sales agents working on
behalf of Senior across the world are required
to operate in compliance with the Code of
Conduct. The Code requires a pre-appointment
due diligence and risk assessment to be
undertaken, prior to engaging or re-appointing
any sales agent and requires them to be issued
with the Code, ensuring that they understand,
acknowledge and accept its requirements.
In July 2021, all employees were issued with
a personal copy of the Group’s updated Code
of Conduct booklet and provided with training
on the revised Code of Conduct. In 2021, 94%
of total employees completed the training.
The Code of Conduct booklet is available in all
languages applicable to the Group’s employees.
Compliance risk assessments and audits
The Company conducts annual Control Self
Assessments at all of the Group’s operating
businesses, which include questions related
to the Code of Conduct. The Company also
conducts Internal Audits which include testing
on areas of governance, including the Code.
Risk assessments are conducted at operating
business and Group level. Risks related to
areas contained in the Code of Conduct are
considered, with follow up actions where
residual risk is deemed too high. A more detailed
fraud risk assessment is also performed.
2021 update
In 2021, Information Security training was
delivered to all employees. Training on Money
Laundering and the Corporate Criminal Offence
Act was rolled out to Finance staff and those
with external-facing roles.
Our plans for 2022
Additional short refresher training courses on
appropriate topics will continue to be rolled out
during 2022.
Whistle-blowing
As part of our internal control procedures,
the Group has a Whistle-blowing Policy that is
communicated across all our operations. This
Policy provides employees with the opportunity
to report suspected unethical or illegal corporate
conduct confidentially and anonymously.
The third-party whistle- blowing hot line,
which is externally hosted, is available in all
languages appropriate to our global locations.
The Group Company Secretary provides
information on any reported whistle-blowing
cases in monthly Secretarial reports to the
Board of Directors. This is a standing agenda
item at every Board meeting. In addition,
the Group HR Director summarises the total
cases and assesses if any patterns or trends
are emerging; this is included in every Group
Chief Executive Officer’s report to the Board.
Any fraud issues that have come to the attention
of the Head of Risk & Compliance are discussed
by the Audit Committee.
Gifts and hospitality
The Group’s Code of Conduct contains specific
provisions on Gifts and Hospitality. Employees
must declare any gift or hospitality provided or
received with the individual or annual aggregate
value in excess of £200 (or lower amount) as
specified in the Gifts and Hospitality Policy.
Third party anti-corruption due diligence
The Company conducts appropriate due
diligence and ongoing monitoring of third
parties with which it works, including regular
screening, risk assessments, and compliance
health checks; the Company also subscribes
to third-party rating organisations to support
its due diligence process, particularly when
appointing agents and distributors. The
Company has a Responsible Sourcing Policy
which includes a structured approval process for
all key suppliers and those with additional risks.
The Group’s Code of Conduct clearly states
that Senior will follow all applicable laws and
regulations, including the UK Bribery Act, etc.
Other Group policies, such as The Use of
Agents, to reinforce this.
Insider dealings
The Company has a Dealing Code (the “Code”),
aimed at ensuring that the Directors of the
Company and employees identified as persons
discharging managerial responsibilities
(“PDMRs”) of the Company and its subsidiaries,
do not abuse, and do not place themselves
under suspicion of abusing, Inside Information
and comply with their obligations under the
Market Abuse Regulation. The Code contains
the dealing clearance procedures which must
be observed by the Company’s PDMRs and
those employees who have been told that the
clearance procedures apply to them. The Code
also contains certain additional obligations which
only apply to PDMRs.
28
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
STRATEGIC REPORT Board
Board gender diversity
The Board is supportive of the aim to increase
its diversity. Following Barbara Jeremiah’s
appointment, five of the nine Directors are
female (55%).
Board succession & Board effectiveness
Please see the Nominations Committee Report
on pages 76 and 77 in the Annual Report
& Accounts 2021 for details of the Board’s
succession planning and the annual review
of Board effectiveness.
Independence of Directors
Five of the Board members out of a total of eight
at the 2021 year-end were independent, these
were Celia Baxter, Susan Brennan, Giles Kerr,
Rajiv Sharma and Mary Waldner. In January
2022, Barbara Jeremiah was appointed to
the Board and is now the Company’s sixth
independent Director.
Shareholder Democracy
Restriction on Voting Rights
The Company has only one class of shares
with equal voting rights. The Company does
not apply any voting rights ceilings.
Size of shareholding necessary to introduce
a new Resolution
Threshold requirements to introduce a new
Resolution at the AGM are stated in the Notes
to the 2022 AGM Notice of Meeting, which
can be found on the Company’s website.
Facilitation of shareholder participation
At the 2022 AGM, shareholders will be able to
vote in person, or by proxy, on resolutions by
post or electronically by visiting www.sharevote.
co.uk. Further details can be found in the Notes
to the 2022 AGM Notice of Meeting.
Internal Audit
The Internal Audit Manager reports to the Head
of Risk & Compliance. In 2021, the Internal Audit
Manager undertook nine Information Security
audits, 10 Risk-based audits and one Thematic
audit. Because of the COVID-19 pandemic, only
one of these audits was able to be carried out
on a physical site visit, the remainder were all
undertaken remotely.
Risk process
Please see the Risks and Uncertainties section
of the Annual Report & Accounts 2021 on
pages 48 to 55.
Data Protection and Information Security
Information security risk assessments are
routinely conducted across the Group, an
example of which includes assessing third-party
suppliers to ensure systems are secure by
design. Where a system is unable to comply
fully with Senior’s security policy or minimum
standards, the risk is identified by subject matter
experts, reviewed with applicable risk owners
and steps agreed to manage any risks identified.
In 2021, information security was a key area of
focus to safeguard the Group’s assets during the
pandemic, which forced many of the Group’s
employees to work from home in environments
that could not be directly controlled by the
Group’s Head of Information Security. Working
from home was facilitated by secure remote
access to the operating businesses’ computer
networks. During the year, all staff received
training and regular reminders about the
risks related to information security and the
importance of awareness of matters such
as fraud, scammers and ransomware, proper
use of the internet and smart downloading.
Targets and Objectives
The Group has a three-year rolling Information
Security plan, which documents its mission to
improve security maturity and reduce business
risk across the Group. As capabilities are
introduced, metrics are developed and routinely
reported (including to the Executive team) which
measure effectiveness and provide a feedback
loop to the ongoing plan.
Physical and Technical Safeguards
The three-year plan builds on existing physical
and technical safeguards already in place,
introducing a series of minimum Security
Standards and baselines applicable across
the Group; for example, the introduction
of a Security Operations Centre providing
standardised, monitoring capability for any
indicators of compromise for the Senior Group.
Certification
The Group’s Information Security policy is based
upon a number of recognised, international
standards, including ISO 27001, NIST CSF and
the CIS top 20 controls, which all the Group
operating businesses are required to follow.
Procedures for Outsourced Data Processing
Where third-party data processing is utilised,
the Group follows its internal data protection
policies and risk assessment procedures,
including reviewing contractual provisions
for both existing and new providers.
Sustainability Governance
Internal governance of Sustainability factors
is reviewed at both Executive Committee
and Board level and the factors are externally
verified, where applicable. Further details can
be found on page 17 of the Annual Report
& Accounts 2021.
Product Safety Governance
Product quality is absolutely core in all of
Senior’s businesses and activities. All of Senior’s
businesses have ISO 9001 accreditation for
manufacturing. The operating businesses
have additional aerospace and automotive
accreditations, dependent upon their intended
markets. Ultimate responsibility for product
quality and safety lies with the senior manager
of each business unit.
All products undergo service/safety risk
assessments, as required in Senior’s demanding
markets. Employees receive regular training on
product and service safety. All businesses have
in place incident investigation and corrective
action policies and procedures and quality
testing programmes.
Product/service objectives or targets are set
by the operating businesses to meet customer
requirements and regular external product/
service safety audits are conducted, where
standards require.
Tax Transparency
Senior’s ‘Approach to Tax’ document can be
found on the Company’s website.
ADDITIONAL
RESOURCES
Read more about Our Technology Themes on
page 36
Read more about Our Technology & Product
Development on page 38
Read more about Stakeholder Engagement on
page 40
Learn more here
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
29
OUR BUSINESS MODEL
We aim to create value for all our stakeholders
through our business model.
OUR PURPOSE
To provide safe and innovative products for demanding
thermal management and fluid conveyance applications
WHAT WE DO
Senior designs and
manufactures highly
engineered, technology rich
components and systems for
principal original equipment
manufacturers in the
worldwide aerospace and
defence, land vehicle and
power & energy markets.
The Group has a global footprint with
26 operating businesses located in
12 countries servicing blue-chip customers.
HOW WE DO IT
Our strengths/differentiators
Organisation
• A culture of autonomous collaboration
• Active sharing of best practices
• Complementary capabilities
• Leverage common customer and supplier
relationships
Financial
• Financial strength supporting investment
and innovation for customer benefit
Global footprint
• 26 operating businesses in 12 countries
covering five market sectors
• An integrated global footprint providing
customers with market proximity and
cost competitiveness
People and culture
• Integrity and high ethical standards
• Maintaining a safe and healthy workplace
• Empowerment of local management,
within a well-defined control framework
• Ongoing investment in personal and
professional development at all levels
throughout the business
Read more about our people on page 24
Innovation
• Focusing on technology product
and process innovation to better
serve our customers and enhance
our business model
Read more about Aerospace on page 56
OUR CORE VALUES
The “Senior way“
Safety
We operate safely, protecting people
and the environment.
Integrity
We operate with integrity and in an
ethical manner.
Customer focus
We put the customer at the heart
of everything we do.
Read more about Flexonics on page 58
30
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
STRATEGIC REPORT
OUR VISION
Our vision is to be a trusted and collaborative
high value-added engineering and manufacturing
company delivering sustainable growth in
operating profit, cash flow and shareholder value.
HOW WE DO IT
Our strategic priorities
Autonomous and collaborative
business model
Senior’s business model is one of
empowering and holding accountable
our businesses, operating within a clearly
defined divisional structure, to develop and
deliver business plans in line with overall
Group strategy.
Focus on growth
We seek to outgrow our end markets,
which have structural long-term growth
drivers, both organically and through
acquisition.
High performance operating system
Senior has implemented a high performance
operating system, drawing on the many
excellent practices from across the Group,
through the Senior Operating System and
a comprehensive business review process.
Respect and trust
We work together with mutual
respect and trust.
Accountability
We do what we say.
Excellence
We continually strive to do better
in every aspect of our business.
Competitive cost country strategy
Senior has a global footprint to ensure we
stay competitive at a capability and cost
level. In addition to our North American
and European footprint we have facilities
in Thailand, Malaysia, China, India, Mexico,
South Africa and the Czech Republic which
help to ensure we meet our customers’
cost and price challenges whilst enhancing
returns on investment.
Considered and effective capital
deployment
Senior understands the importance of
considered and effective capital deployment
in the interest of maximising the creation of
shareholder value.
Talent development
Senior has a skilled workforce and highly
experienced entrepreneurial business leaders.
We invest continuously in technical skills and
professional and leadership development.
Read more about our strategic priorities on
pages 34 and 35
Our culture
Our Values set out the principles and
standards of behaviour that drive our culture.
The safety and wellbeing of our employees
is a priority in everything that we do, and our
safety culture has been key to how we have
successfully managed the business during
the pandemic, supporting employees through
very challenging times. In our autonomous
and collaborative business model, our
operational business leaders are empowered
and accountable, and set the tone for their
operations. The principles of opennes and
transparency are strongly encouraged and
are evident across all of our businesses.
OUR LONG-TERM
SUSTAINABLE VALUE
Our employees
Inspiring entrepreneurial
and operational leadership
directs a highly motivated
and skilled workforce
Our customers
Continuously delivering
competitive products and
solutions to customers
with outstanding quality
and delivery performance
Our suppliers
Developing reliable, ethical
and sustainable supply chains
ensuring we can meet our
customers’ requirements
Our communities
Actively participating and
helping to improve the quality
of life in our local communities.
Minimising our environmental
impact through peer leading
sustainability programmes
Our shareholders
Generating value through
sustainable growth in
operating profit, cash flow
and shareholder value
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
31
INVESTMENT CASE:
POSITIONED FOR GROWTH
Senior’s clear and focused strategy continues to maximise value for all its
stakeholders. With a strong focus on operational performance and growth in
our end markets, Senior is confident of delivering its target return on capital
employed of a minimum of 13.5% (post IFRS 16) over the medium term
OUR PURPOSE
To provide safe and innovative products for demanding
thermal management and fluid conveyance applications.
AEROSPACE
FLEXONICS
CLEAR STRATEGY TO MAXIMISE SHAREHOLDER VALUE
Read more about on pages 56 to 59
A DIFFERENTIATED
BUSINESS MODEL
STRATEGIC
PRIORITIES
TRUSTED AND COLLABORATIVE HIGH VALUE ADDED ENGINEERING AND MANUFACTURING COMPANY
DELIVERING MINIMUM 13.5% ROCE (RETURN ON CAPITAL EMPLOYED) OVER THE MEDIUM TERM
STRONG CORE END MARKETS
Civil Aerospace
Increasing passenger demand to
fly and higher air traffic drives the
need for new and replacement
aircraft. Environmental pressures
to focus on cleanest technology
is ideal for Senior’s product and
technology portfolio
Read more about on page 10
Defence
Defence remains a priority for the
US. Senior has key positions on
major funded programmes
Read more about on page 10
Land Vehicle
Demand driven by tightening
global emission control regulations
for truck, off-highway and
passenger vehicles
Power & Energy
Market leader of complex fluid
systems and products
Read more about on page 10
Read more about on page 10
32
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
STRATEGIC REPORT Senior is well positioned to build
on our strong capabilities and to
capture growth opportunities.”
David Squires
Group Chief Executive Officer
LEADING POSITION IN
ATTRACTIVE MARKETS
LONG TERM GROWTH
AND VALUE CREATION
Focus on IP rich fluid conveyance
& thermal management
technology and capabilities.
These capabilities are supported by a strong body
of design and manufacturing process intellectual
property and know-how.
DELIVERING SUSTAINABLE GROWTH
OUR DIFFERENTIATORS
• Safety & ethics are always our highest priorities
• High performance operating system
• Intrinsically strong cash generation
• Autonomous and collaborative business
model with a robust control framework
• Robust balance sheet
• Technology, product and process innovation
supporting transition to clean energy
• Considered and effective capital deployment
• Global footprint
Read more about on page 30
ESG LEADERSHIP
• First worldwide in A&D sector to have greenhouse
gas reduction targets verified and approved by the
Science Based Targets initiative
• CDP leadership rating of A- on climate change
and A on supplier engagement
• Continuously improving Lost Time Injury Illness Rate;
a reduction of 69% from 2015
• Early adopters of Hampton Alexander and Parker (2023)
Reviews on gender and ethnic diversity targets
Read more about on pages 12 to 29
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
33
STRATEGIC PRIORITIES
The following six strategic priorities are key elements of our business model, which
drive the creation of stakeholder value. Our progress since they were established
is noted below and they continue to receive specific attention and focus.
1.
ENHANCE SENIOR’S
AUTONOMOUS AND
COLLABORATIVE BUSINESS
MODEL
Senior’s business model is one of empowering
and holding accountable our businesses,
operating within a clearly defined control
framework to develop and deliver business plans
in line with overall Group strategy. Increasing
collaboration amongst businesses in the Group
is a priority to ensure economies of scale are
realised whilst maintaining the autonomous
business structure. Business leaders throughout
Senior are actively embracing collaboration
activities with priorities set at Group level in
consultation with the businesses.
What we did in 2021:
• Implemented engagement guidelines to
help optimise the transfer of work to cost
competitive locations and to facilitate higher
level solutions to meet customer needs;
Our plans for 2022
• Enhance effectiveness of Group-wide
Procurement, Technology and IT Councils.
• Refocus our Advanced Technology Collaboration
Forum to align our technology investment with
our strategic purpose, focusing on research
and development that support growth in low
carbon technologies.
Governance
The Executive Committee and the Board regularly
review the organisational design of the Group to
ensure it is aligned to our strategic plan.
3.
INTRODUCED A HIGH
PERFORMANCE OPERATING
SYSTEM
Senior has implemented a high-performance
operating system, drawing on the many excellent
practices from across the Group. The key
elements include:
• The Senior Operating System: an operational
toolkit incorporating best practice processes such
as lean and continuous improvement techniques;
supplier management; new product introduction;
5/6S methodology; factory visual management
systems; risk and financial management;
• A comprehensive business review process
utilising a balanced scorecard incorporating
KPIs with focus on performance, growth,
operational excellence and talent development.
What we did in 2021:
• Continued to implement the comprehensive
restructuring plan in response to global pandemic;
• Implemented APQP gated NPI processes across
75% of Aerospace operating business.
Our plans for 2022
• Ensure the organisation is suitably aligned for the
recovery that is undeway;
• Multiple lean events continue with focus on cycle
time reduction and cost reduction, together with
continued targeted inventory improvement
workshops;
• Complete the roll-out of APQP process standards
across remaining Aerospace operating businesss;
Governance
Our Vice President of Operational Excellence chairs
the Lean Council on a monthly basis.
The Executive Committee reviews operational
performance and the Group Chief Executive
Officer reports progress to the Board at every
Board meeting.
2.
FOCUS ON GROWTH
Senior’s end markets have structural long-term
growth drivers. We believe it is possible to outgrow
our end markets and we seek to do that both
organically and through acquisition by:
• Growing market share, particularly
with key customers;
• Focusing on innovation;
• Geographical expansion;
• Seeking out and exploiting adjacent opportunities
organically and through acquisition.
What we did in 2021:
• Diversified into product manufacture for satellite
structures applications;
• Qualifyied a sophisticated bleed air system
for an upcoming flight test programme using
our advanced Additive Manufacturing (“AM”)
capability;
• Development of high flow hydrogen gas
compressors for clean energy applications and
battery and electric propulsion liquid coolant
volume compensators in the Urban Air Mobility
(“UAM”) market sector.
• Completed qualification of our RT2i composite
thermoplastic aerospace ducting product and
successfully transitioned into series production
of a Business Jet LP duct system utilizing both
RT2i 3D Near Net Shape and Fusion Deposition
Modelling (“FDM”) non-metallic AM parts
within critical areas of the system.
• Completed the industrialisation of Electric Vehicle
(“EV”) 70kW cooler. Secured additional Fluid
Conveyance projects for Hybrid and EVs.
Our plans for 2022
• Continue product development projects to
support further diversification in space and
defence that utilises available capacity in our
Aerospace structures operating businesses.
• Continue to pursue the utilisation of RT2i 3D
Near Net Shape and Fusion Deposition
Modelling (FDM) non-metallic AM parts for
ducting applications in the regional jet market.
• Continue to support our customers in the
development of thermal management projects
for passenger car and commercial vehicle
applications.
Governance
Growth opportunities are regularly reviewed by
the Executive Committee and Board. The
AdvancedTechnology Forum is in place under the
chairmanship of the Group Director of Business
Development and Strategy and progress on strategic
technology and product developments are regularly
presented to, and discussed by, the Executive
Committee and the Board. The long-term strategic
growth plan is evaluated at the annual Board
Strategy Review and monitored continuously.
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SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
STRATEGIC REPORT Read more about Risks and Uncertainties on pages 48 to 55
4.
COMPETITIVE COST COUNTRY
STRATEGY
Enhance Senior’s global footprint to ensure our
businesses stay competitive at a capability and
cost level, with key investments made in Thailand,
Malaysia, China, India, Mexico, South Africa and
the Czech Republic to help ensure we meet our
customers’ cost and price challenges whilst
enhancing returns on investment. Establishing
increasingly sophisticated capabilities in these
competitive cost countries and optimising
production capacity to align with demand.
What we did in 2021:
• Expanded capacity at our Mexican Aerospace
operation in support of increasing volumes.
• Successfully launched new programme for
production on new EU commercial aircraft business
class seat structures in Thailand and secured new
content on several OEM engine programs for
commercial aerospace platforms.
• Completed the transfer of production equipment
from the Pacific Northwest to Thailand to support
wing-product series production activities in 2022.
• Secured additional high-volume land vehicle
contracts for fluid conveyance products, including
Hybrid and EV applications in Mexico and Czech
Republic.
Our plans for 2022
• Continue Senior Aerospace Mexico investments
in talent and equipment to allow further production
transfers.
• Secure further contracts to fill capacity in our cost
competitive country locations.
• Continue to transfer cost sensitive product lines to
locations where the cost structure would deliver
a more competitive advantage.
Governance
The Executive Committee conducts monthly
Business Reviews of all operations. The Group Chief
Executive Officer and Group Finance Director report
and discuss progress at each Board meeting. The
overall progress of the competitive cost country
strategy is reviewed at the Board Strategy Review
on a regular basis.
5.
CONSIDERED AND EFFECTIVE
CAPITAL DEPLOYMENT
Senior understands the importance of considered
and effective capital deployment in the interest of
maximising the creation of shareholder value. All
significant investments undertaken by Senior are
assessed using a rigorous investment appraisal
process and are supported by a business case.
The Group has a financial objective to maintain an
overall return on capital employed in excess of the
Group’s cost of capital and to target a minimum
pre-tax return on capital employed of 13.5% on
a post IFRS 16 basis.
What we did in 2021:
• Successfully raised £49.7m from the strategic
divestment of the Senior Aeropsace Connecticut
helicopter structures business;
• Realised value from the sale of the property
following the closure of our oil and gas machining
Senior Flexonics Malaysia facility, which offset
the closure costs;
• Completed the transfer of production from Senior
Aerospace Bosman in the Netherlands to our
Aerospace facilities in France.
Our plans for 2022
• Maintain our pricing and return on capital
discipline when negotiating contracts and
assessing investments;
• Continue to actively manage portfolio;
• Currently expect to reintroduce dividend in 2022.
Governance
The Board regularly reviews its portfolio to
ensure that long-term value is being generated for
shareholders. Where appropriate, divestments will
be considered. M&A opportunities are evaluated and
discussed at each Board meeting, as appropriate,
and the M&A and Prune To Grow strategies are
reviewed at the Board’s Strategic Review.
6.
TALENT AND DEVELOPMENT
Senior has a skilled workforce and highly
experienced entrepreneurial business leaders.
It aims to further develop and attract new talent,
supporting employees with on-line tools
to enable personal and skills development.
The Group has a strong focus on diversity and
inclusion across the business including on our
Board and Executive Team. We were early
adopters of Hampton Alexander and Parker
Review recommendations on gender and
ethnic diversity targets.
What we did in 2021:
• We launched our first Company-wide
Employee Engagement Survey;
• Developed and initiated action plans as a result
of the survey and other feedback
mechanisms, eg focus groups and employee
forums;
• Participated in the 30% club Mission Gender
Equity cross company mentoring Scheme
for the fourth year.
• Expanded our network of recruitment
Our plans for 2022
• Ongoing actions as a result of the
Engagement Survey feedback;
• Focus on attracting and developing talent.
To support this we will continue to implement
“Recruit”, our online recruitment system, and
supplement local training and development
activities by launching more skills and
personal development eLearning, via “Learn”,
our global learning management system;
• Continue to focus on diversity and inclusion
across the business with a particular focus
on gender;
• Undertake our second Global Employee
Engagement Survey to assess culture and
employee engagement across the Group.
Governance
The Executive Committee conducts an extensive
review of operating businesses leadership
succession plans. The review scrutinises our
talent pipeline, identifying successors or interim
cover for key roles across our businesses and
ensuring appropriate development plans are in
place to enable individuals to fulfil their potential.
The Board formally reviews the succession plans
for the Executive Team and their direct reports
on a bi-annual basis.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
35
Complex airframe
components & assembliest
OUR TECHNOLOGY THEMES
Senior’s fluid conveyance and thermal management businesses have design IP (intellectual property)
and our structures businesses have manufacturing IP. Both types of IP are underpinned by our
investment in advanced manufacturing technology and supported by our extensive design and
engineering expertise. Our global footprint in Aerospace & Defence, Land Vehicle, Power & Energy
and other attractive and diverse end markets offer deliverable growth opportunities.
FLUID CONVEYANCE AND THERMAL MANAGEMENT
Fluid conveyance is the flow of fluid, including both gases and liquids,
within a system. Senior has rich IP in fluid conveyance applications; for
example, our fluid conveyance designs have been key to maintaining
aircraft cabin air supply and thermal control for the crew and passengers
during flight.
In thermal management, as the pace of electrification picks up, our
technology and IP can be used to develop products that can prolong
the life of the battery and increase charging speed; a key differentiator
in electric and hybrid vehicle economics.
Capabilities highlights
• World class design capabilities
for complex fluid conveyance
systems incorporating zero-
leakage flexible joints to
compensate for vibration and
thermal displacement
• Industry leader in the design
and fabrication of highly
engineered edge-welded and
formed bellows devices and
components from 3.2
millimetres to 5.1 metres
diameter for various
applications, including
frictionless servo-pneumatic
actuators
• Component and system level
simulation and analysis, including
Finite Element, Computational
Fluid Dynamics and vibration
analysis plus verification and
qualification testing
• Extensive expertise with thin-wall
aluminium, copper and stainless
steel structures for demanding
thermal management solutions
for battery cooling, fuel cells and
cryogenic applications
• Additive Manufacturing
capabilities in both metal and
polymer materials as an enabling
technology for complex high-
pressure and low pressure
ducting systems and heat
exchanger designs
CASE STUDY
An aerospace OEM has dedicated significant
funding and resources to develop a ground
demonstrator with a full hydrogen powertrain
by 2025.
The concept is similar to land vehicle applications, and in this
particular case, the customer has chosen to run the system at
cryogenic temperatures for efficiency.
Senior Flexonics has extensive experience with fuel cell battery
technologies. One of our core capabilities is the design and
development of cooling systems for batteries and electronics
that enable saafer and faster charging speeds. We also have
cryogenic experience from our medical products that use liquid
helium for cooling.
Through existing collaboration between Senior Aerospace and the
customer, we have already established ourselves as a trusted
aerospace supplier.
Benefiting from our synergies, Senior Aerospace and Senior Flexonics
collaborated to submit a thermal management proposal for this
emerging powertrain. The learnings from this project will prepare
us for future opportunities that involve similar technology.
Tubing for battery
fluid handling
Ultra-lightweight
composite low
pressure ducting
Battery cooling plate
for electrified vehicles
Electronics
cooling plate
36
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
SAF-compatible aircraft
ducting system
STRATEGIC REPORT Complex airframe
components & assembliest
FLUID CONVEYANCE
& THERMAL
MANAGEMENT
STRUCTURES
Fluid Conveyance &
Thermal Management
Product and System Design
& Manufacturing IP
Structures
Complex Machining and
Manufacturing Know-How:
Process IP
STRUCTURES
Modern airframes and turbine engines require durable lightweight
components manufactured to close tolerances that operate in extreme
environments. Senior is a trusted partner for high-value added engineering
and manufacturing of critical structural components for the leading OEMs
in the civil and military aviation sectors. Our capabilities and strong
customer relationships have secured substantial content on the key
aerospace platforms.
Capabilities highlights
• Deep expertise in
manufacturing, assembly and
qualification of a wide range of
complex airframe, aeroengine
and power/energy components
• State-of-the-art capabilities in
complex 5-axis machining and
fabrication, including toolpath
optimization, on-machine
probing, and vibration
dampening
• Highly vertically integrated, with
wide-ranging process
qualifications across machining,
Non-Destructive Testing, special
processes, welding and forming
• High level of collaboration
between operations in North
America, the UK and Southeast
Asia including software model-
based engineering capabilities
CASE STUDY
Recently space launch and satellite applications
have expanded rapidly, creating new aerospace
opportunities.
A new customer presented Senior with a challenge to produce
complex 5-axis machined structural components for a prototype
platform, in a very short lead time.
Senior’s engineering team worked closely with the customer’s design
engineering team to identify maximum impact features for lead-time
reduction and developed a best-in-class process based on toolpath
simulation, in-cycle probing and cutting tool parameters optimised
for machine/spindle harmonics.
Backed by our footprint across regions and collaborative business
model, we strategically split the work package between two Senior
sites in the US with identical equipment, to concurrently manufacture
the initial production units.
As a result, First Article parts were delivered in record time with
100% quality compliance, earning customer accolades and new
business for follow-on production orders due in 2022/23.
Complex airframe
components & assemblies
Precision-machined
aeroengine
components
Complex space
satellite structures
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
37
OUR TECHNOLOGY AND
PRODUCT DEVELOPMENT
Electrification and hydrogen power are poised
to remain the key technology themes in all our
end-markets in the decades to come.
2020
2030
AEROSPACE
Observation
Current generation engines
bring 15 to 25% of fuel
efficiency improvements.
Smaller electrified aircraft will
enter into service this decade.
Our response
We have significant content in
current best-in-class engines.
We are designing and
manufacturing components
for electric vertical take-off
and landing (“eVTOL”) aircraft.
Observation
The US aims to supply
≥3 bn gallons of sustainable
aviation fuels (“SAF”) per year
by 2030.
The EU plans for SAF to be
≥5% of aviation fuels.
Additive manufactured LEAP engine
oil bearing nozzle and distributor
LAND VEHICLES
Observation
Alternative fuels such as
natural gas and hydrogen are a
crucial engine bridge
technology prior to
widespread electrification of
commercial vehicles.
Our response
Upgraded and enhanced
versions of our components
such as the Radial Fin EGR
cooler are fuel agnostic and
ensure compliance and
efficiency for all applications.
Observation
A COP26 declaration calls for
all new car sales to be zero
emission by 2035 in leading
markets.
POWER & ENERGY
Observation
Some countries recognise
the role of nuclear power to
reach net zero.
Our response
We are supporting
engineering with active OEMs
of Small Modular Reactors.
Observation
The EU targets renewables
to be ≥40% of energy mix
by 2030.
At COP26, world leaders
have agreed to phase out
fossil fuel subsidies.
Our flue gas diversion
products are mitigating climate
impact for the time being.
The US eyes 100% carbon
pollution-free electricity
by 2035.
Wye piping, reducer and crossover
expansion joint conveys fluid in the
form of steam powering turbines
to generate electricity
38
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
STRATEGIC REPORT Our fluid conveyance and thermal management
technology, highly relevant to these market
development themes, will help us provide
customers with high-valued solutions in the future.
2040
2050
Our response
Our current fluid conveyance
technologies are compatible
with SAF.
We are supplying hoses
for electrolysers that may
generate hydrogen for
SAF production.
Observation
Alternative-powered aircraft
will increase demand
for our battery thermal
management, fuel cell
and cryogenic fluid
handling expertise.
Our response
Our Aerospace and Flexonics
divisions are teaming up to
develop cooling and fluid
handling products for our
customer’s demonstrator
hydrogen powertrain units.
Stainless steel hoses for
hydrogen production
Cryogenic products in medical
MRI liquid helium systems
Our response
Our electric vehicle inverter
heat sink “Omega Fin” has
been awarded a patent.
We are in active customer
discussions on our battery
and electronics cooling and
fluid handling products.
Observation
At COP26, fifteen countries
have committed to 100%
zero-emission new truck and
bus sales by 2040.
Our response
We have commenced
production of our 70kW
battery cooler for e-buses.
We have numerous
developments with battery
manufacturers and OEMs.
NET ZERO
“Omega Fin” inverter heat sink
Battery cooling plate for
electrified vehicles
Our response
Energy storage will be
required on a larger scale
as renewables grow.
Senior has solutions for
thermal management for
energy storage applications.
Observation
Emerging economies will
catch up on renewables
share.
Our response
We will continue to grow
our low-carbon business,
including solar and wind.
Ensuring stable power
supply for critical
infrastructure such as data
centres will be important.
We have solid experience
in stationary fuel cell backup
power for data centres and
hydrogen conveyance
solutions.
Heat exchanger for thermal
management
Fuel distribution anode
separator plate
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
39
STRATEGIC REPORT
STAKEHOLDER ENGAGEMENT
OUR STAKEHOLDERS
Engaging with our stakeholders
is fundamental to our business
success. Our stakeholders are
people, communities and
organisations with an interest or
concern in our purpose, strategy,
operations and actions.
Senior engages with five key
groups – our employees, customers,
suppliers, communities, and
shareholders. By engaging and
collaborating with our stakeholders
we can ensure our business
grows and delivers long-term
sustainable value.
Employees
Read more on page 41
Customers
Read more on page 41
Suppliers
Read more on page 42
Communities
Read more on page 42
Shareholders
Read more on page 43
WHY ARE THESE STAKEHOLDERS
IMPORTANT TO OUR VALUE
CREATION?
EMPLOYEES
The calibre and capabilities of the
people within the Group drive our
success and we recognise the
importance of attracting the best
talent into the business and
retaining and developing
individuals to enable them
to do their best work
Skills, loyalty
and value
creation
Career
development
opportunities
SUPPLIERS
Constructive engagement with
suppliers sets fair expectations on
safety, quality, ethical behaviour
and delivery performance
Respectful
relationships
and supply
chain stability
s s
ntinu o u
o
c
t a k e holder en
g
a
g
e
m
e
n
t
CUSTOMERS
Our Core Value of “Customer
Focus” recognises the
importance of customers
in our success
Safe and high
performance
products and
value creation
Safe, quality and ethical
supplies and value creation
Corporate finance
and valuable
feedback
Sustainable
growth in
operating profit,
cash flow and
shareholder value
Local
support
and value
creation
Trust and long-lasting
relationships
Talent for recruitment
and sense of
community
SHAREHOLDERS
Senior strongly values the support
and engagement of its shareholder
community and understands the
importance of this in the future
success of the business
COMMUNITIES
We recognise our responsibility
to the communities in which
we operate
40
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
EMPLOYEES
How we engage
The global pandemic meant developing new
ways of working and ensuring we maintained
effective communication and employee
engagement, while remaining COVID secure
and creating an environment of stability
for employees.
We launched our first global employee
engagement survey in May 2021. The
survey was split into three main sections,
Engagement, Values and Health and
Wellbeing, and was delivered electronically,
to all employees in their preferred language.
Outcome of engagement
The response rate of 81% exceeded our
expectations and the benchmark for
manufacturing companies with a significant
number of employees who do not have
ready access to company emails. The 81%
response rate in itself is a positive indicator
of engagement and employees’ desire to
provide feedback.
Overall the feedback was positive, with a
score of 7.4 out of 10 for the question “Overall,
how satisfied are you working at Senior?”.
Other highlights included management
support, peer relationships, goal setting and
meaningful work. As expected, there are
areas for improvement. Across all of Senior
the key areas we should work on are:
improved communication regarding the
operating business strategy and mission
so that people are inspired by what we do.
Reward was also an area for improvement,
both in terms of how individuals are rewarded
and the process for determining pay.
Company actions responding to
engagement outcome
Management-level actions
In our autonomous and collaborative business
model, the questions and feedback were
collected at an operating business level and
each operating business has analysed their
feedback, shared the feedback with their teams
and developed action plans. Action plans are
monitored by the Executive leadeship teams.
Board-level actions
Feedback and high level action plans have been
shared with the Board and in particular, Celia
Baxter, the non-executive Director designated
to provide focus on employee engagement, has
spent time doing a deeper dive on the feedback.
Celia Baxter and Jane Johnston, Group HR
Director, have resumed their programme of
face-to-face focus groups and visited four UK
businesses, holding 15 sessions in the autumn of
2021. The sessions were interactive and provided
an opportunity for Celia Baxter to engage directly
with a cross section of employees, including
employee and union representatives, asking
and answering questions. As well as holding
the focus groups, the site visits included
factory tours and meeting the leadership teams.
In addition, we consulted with UK employee
representatives on executive pay.
CUSTOMERS
How we engage
We regularly engage with our customers at
operational and senior levels. Division-level
Customer Relationship Managers are in
place to interact with and support our largest
customers, ensuring that we monitor and
work to understand what is happening in their
businesses, how it affects their end-markets,
and that we respond appropriately across
all of Senior.
We actively seek feedback from our
customers via frequent, tactical interactions
between our operating business customer
account and buisness development managers,
with monthly reporting of activities and
monitoring of customer scorecards for Senior
businesses. Whilst Senior regularly receives
customer awards for operational excellence,
in cases where our performance falls short of
expectations, we actively engage with the
customer to agree both improvement targets
and implementation schedules.
Outcome of engagement
We conducted multiple Senior Management
meetings with our major customers in 2021,
covering both normal business activities and
for dedicated purposes with our largest
customers to understand more clearly what
the customer perceptions were regarding
Senior and how we could improve. This
resulted in Senior winning several large
packages of work in 2021; taking market
share from our competitors.
Company actions responding to
engagement outcome
Management-level actions
Listening to and understanding our customers
and their programme issues provides valuable
insight which helps inform future technology
and product development and innovation
investments and activities.
We conduct periodic, formal Senior
Management Meetings (“SMMs”) with
our largest customers. Operational metrics,
communications, growth strategies, and
market dynamics are frequently the main
topics and help both Senior and the customer
Executives to understand each other better.
Board-level actions
Our Board receives detailed monthly updates
relative to customer activities.
Participation in first global
employee opinion survey
81%
Engagement
score
Health and
Wellbeing score
7.1
7.6
out of a max of 10
out of a max of 10
Actively seeking feedback from our
customers is vital to ensure we are
aligned to their needs.”
Launie Fleming
Chief Executive of Aerospace Division
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
41
SUPPLIERS
How we engage
We engage with our suppliers in a variety
of ways, including during tender and bid
processes, site visits and audits, where
appropriate. In 2021, collaborative
communication with critical suppliers was key
to managing the effects of escalating supply
chain constraints impacting our operating
businesses, in some cases utilising weekly,
or even daily, status update meetings. The
Executive Committee continues to closely
monitor the health and performance of critical
Group suppliers and supports the operating
businesses in their engagement with suppliers
where necessary.
In line with our Contract Review Policy, which
is mandatory for all operating businesses, we
continue to communicate the requirements of
the Group Responsible Sourcing Policy to key
suppliers and provide feedback to our suppliers
on their performance and, where necessary,
will agree improvement action plans.
The Group also completes bi-annual reporting
pursuant to The Reporting on Payment
Practices and Performance Regulations (2017),
demonstrating our commitment to remain a
strong financial partner with our suppliers.
The Board reviews the bi-annual reports for
our UK subsidiaries to monitor compliance
with negotiated vendor payment terms.
For Scope 3 GHG emissions, Senior
committed that 80% of its suppliers by spend,
covering purchased goods and services and
capital goods, will have science-based targets
by 2025.
We identified suppliers to respond to CDP’s
questionnaires through an online platform.
We arranged webinars and video calls with
suppliers to provide support, communicate
expectations and exchange best practice ideas.
Outcome of engagement
Our collaboration with suppliers to respond to
the increases in supply chain challenges during
2021 allowed the Group to manage lead times,
leverage long-term supply agreements,
consolidate supply requirements and identify
additional supply sources, where needed.
For the CDP’s supply chain engagement
programme, we identified around 340 suppliers,
accounting for 80% of the Group’s total spend.
In 2021, we engaged with all 340 suppliers
through CDP’s supply chain programme.
We have analysed and verified the results. The
insights from the engagement programme were
then used to set strategy and prepare for 2022.
For all our efforts in 2021, CDP have awarded
us Supplier Engagement Leader status based
on our Supplier Engagement Rating (“SER”).
Company actions responding to
engagement outcome
Management-level actions
The Executive Committee identified supply
chain challenges as a new principal risk to
the Group in 2021. In response, supply chain
concerns and mitigating actions have been
a focal point during operating business
reviews and Executive Committee meetings.
The Group Chief Executive is directly engaged
with our largest suppliers on our Scope 3
greenhouse gas emission targets, and provides
regular updates to the Board on progress.
COMMUNITIES
How we engage
Many of the Group’s operations are major
employers within their local communities
and nurture good relationships with their
stakeholders, finding ways to contribute
to local society, in addition to providing
employment opportunities. Despite the
pandemic, where possible, community
engagement programmes were maintained.
Examples of our community engagement
programmes include:
• In 2021, SA Thailand provided Scholarship
to 22 students in the Diploma Degree in
Aerospace Components Manufacturing
for two years. SA Thailand developed
the training programme with Thai-Austrian
technical college.
• SA Mexico supported women with cancer
this year and money was raised by selling
used plastic to recycling companies.
• Senior India collaborated with NGO Anadi
Seva Prakalp to construct a dining hall along
with a kitchen for a home for the elderly
and replaced the facility’s old inverter
batteries for power back-up.
• SF Pathway provided coaching to students
from local schools who have an interest
in welding.
Outcome of engagement
The first group of students supported by
SA Thailand will graduate in March 2022.
The collected donation from SA Mexico was
able to fund seven chemotherapy treatments.
The help from Senior India enabled food to
be prepared and served in the new kitchen
and dining hall in the home for the elderly,
improving the quality of life of senior residents.
Through engagement with local schools,
SF Pathway identified talent in the local
community and inspired local students
to pursue their passion.
Company actions responding to
engagement outcome
Management-level actions
Looking forward, Group operations will continue
to support communities by contributing to
charities serving their local causes, including
fundraising for local hospitals, children’s homes,
cancer foundations, charities supporting mental
health and the elderly.
Board-level actions
The Board continues to focus on its responsibility
to our communities and aims to identify
those Environmental, Social and Governance
considerations that have the potential to impact
our long-term sustainability as a business.
42
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
Engaged with
340
suppliers through CDP’s
supply chain programme
Board-level actions
The Group Director of HSE & Sustainability
attended two Board meetings in 2021 and
provided an in-depth review on the progress
in engaging with suppliers in respect of the
Group’s Scope 3 targets.
Read more in the Risk & Uncertainties Section on
page 52
Read more in the Sustainability Section on page 15
I am pleased that we have continued
to engage with, and support
local communities, successfully
navigating the challenges posed
by the pandemic.”
Jane Johnston
Group HR Director
STRATEGIC REPORT
SHAREHOLDERS
How we engage
In 2021, in addition to the regular engagement
that we maintain with our major shareholders,
we had extra contact and consultation due
to the conditional proposals from LSF XI
Investments, LLC, a company advised by Lone
Star Global Acquisitions, Ltd. It was important
for us to communicate and engage with our
shareholders to answer all questions, queries
and concerns they had on the Company and
the Board’s decision around the proposal.
During 2021, the Company’s Chairman also
attended the full-year and interim results
announcements in March and August,
respectively. The Chairman undertook a series
of conference calls with the Company’s major
shareholders to discuss any queries they
may have regarding the corporate governance
of the Company. Furthermore, Celia Baxter,
the Senior Independent non-executive Director,
was also available to attend meetings with
major shareholders upon request, so providing
an alternative channel of communication
between the Company and its shareholders.
Twice this year, the Group Chief Executive
Officer, Group Finance Director and Director
of Investor Relations & Corporate
Communications undertook a series of virtual
meetings (by video conference or conference
call) with our major shareholders, following the
announcement of the full-year and interim
results, to discuss both the Board’s strategic
objectives and the detailed performance of the
business as well as to understand their views
and address any concerns they may have on
the Company.
In addition, we issued four market updates,
each time offering our major shareholders
the opportunity of a follow-up call with our
Group Chief Executive Officer and Group
Finance Director.
Furthermore, we held an in-person CMD at
the London Stock Exchange on October 12,
where we showcased our strategy,
capabilities, and a range of our business
leaders. We also provided investors with a
deeper insight into our fluid conveyance and
thermal management technology and how we
are future proofing growth of the business as
we transition to a low carbon economy.
The Company typically makes constructive
use of the Annual General Meetings (“AGM”)
to communicate with its private shareholders
as we value their engagement and the
opportunity for the Group Chief Executive
Officer to present on the Group’s business.
In April 2021, this process had to again be
limited, because of the UK Government’s
restrictions due to the pandemic; however,
we ensured that private shareholders would
have live audio access to the proceedings
of the AGM and the opportunity to submit
questions to the Directors and listen to
their responses.
Throughout the year we responded to
requests for further information.
Regular investor updates were provided to the
Board as part of the reporting cycle, which
includes feedback on investor perceptions and
market environment. Updates from Company-
level engagement with shareholders are
provided to the Board as appropriate.
In 2021, Celia Baxter (acting in accordance
with her role as the Chair of the Remuneration
Committee) and our Director of HR engaged
and consulted with major shareholders, key
proxy voting agencies and advisory bodies (ISS,
Glass Lewis and the Investment Association)
throughout the year on key remuneration
topics and to gather their views on their voting
preferences regarding the Remuneration Policy
and Report and potential future changes.
Outcome of engagement
• Shareholders were kept fully informed of the
performance, market dynamics and strategy
of the Group.
• Fully informed shareholders about the Board’s
decision in the corporate activity process.
• Followed up and engaged with major
shareholders on the changes to the
Remuneration Policy and the decisions
taken by the Board regarding the outcome
of the 2020 executive bonus relating to the
attainment of free cash flow targets and to
penson alignment.
• Provided reassurance that the Group
continues to be in a strong position and
remains a good investment opportunity.
• Received better understanding of shareholder
expectations in respect to strategic decisions,
remunerations and sustainability particularly
climate change risks and opportunities.
The frequency of meetings with
major shareholders increased in
2021...these exchanges highlighted
the value of establishing and
maintaining close relationships.”
Ian King
Chair
Company actions responding to
engagement outcome
Management-level actions
Engagement with shareholders during the
corporate activity bid process reconfirmed how
engaged our investors are with regard to the
Company’s performance and ensuring that
continuing our strategy will deliver significant
shareholder value over the medium-term.
Questions focused on end-market recovery
and key areas of Senior’s strategy. In response,
we provided a clear market and strategy update
at the CMD. This event focused specifically
on providing a deeper insight into our fluid
conveyance and thermal management
technology and how we, as a business,
plan to future proof as we transition to a low
carbon economy.
Management are continuing to meet
with shareholders and will be returning
to in-person meetings as part of the full year
2021 results roadshow.
Board-level actions
Feedback received from engagement with our
shareholders has been taken into consideration
as noted in the Remuneration Report.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
43
SECTION 172 STATEMENT
In their discussions and decisions during 2021, the Directors
of Senior plc have acted in the way they consider, in good
faith, would most likely promote the success of the
Company for the benefit of its members as a whole.
HOW THE BOARD CONSIDERED
STAKEHOLDERS DURING 2021
In accordance with Section 172 of the
Companies Act 2006, the Directors are
required to have regard to wider expectations
of responsible business behaviour, such as:
The likely consequences of any decision
in the long term:
• The Directors recognise the decisions they
make today will affect Senior plc’s long-term
success. During the year, the Board had
particular regard to the long-term success
of the Company in its decision to conduct a
thorough review to assess the fundamental
value of Senior as well as the likely value to
be created by the continued delivery of its
strategy when it faced corporate action
in the form of a conditional proposal from
LSF XI Investments, LLC, a company advised
by Lone Star Global Acquisitions, Ltd. Having
carefully considered this proposal, the Board
is unanimously confident that continuing
the focus on our strategy will deliver
significantly more value to shareholders
over the medium-term.
• The Directors also made the decision to divest
Senior Aerospace Connecticut, our stand
alone, build-to-print helicopter structures
operating business to PCX Aerosystems, LLC.
Upon evaluation, the Board felt that this
decision made sense in the long term as
Senior Aerospace Connecticut was the only
operating business in the Group whose
primary focus is build-to-print parts for the
rotary sector. Therefore, it was better suited
to a larger organisation, which is primarily
focused on that market. The divestiture of this
operating business is consistent with Senior’s
strategy to review the overall portfolio of our
businesses and evaluate their strategic fit
within the Group. The net proceeds from the
sale were used to further strengthen Senior’s
balance sheet and provide greater flexibility
for the Group to operate within its capital
deployment framework.
• Further details can be found on the
Investment Case (page 32), Business Model
(page 30) and Strategic Priorities (page 34).
The impact of Senior plc’s operations
on the community and environment:
• Many of the Group’s operations are major
employers within their local communities
and nurture good relationships with their
stakeholders, finding ways to contribute
to local society, in addition to providing
employment opportunities. Despite the
pandemic, where possible, community
engagement programmes were maintained.
Further details on the Group’s activities
are set out on page 26.
• A commitment to sustainability underpins
Senior’s purpose, and is a key objective of the
Directors and the Board. Senior’s programme
is well defined and being delivered. Its
progress is measured by metrics, targets and
an annual scorecard. Senior’s industry leading
ESG disclosures and ratings are evidence
of the Group’s long-standing approach to
sustainability. Senior remains the only,
company in its sector to have its scope
1, 2 and 3 greenhouse emissions reduction
targets approved and verified by the SBTi.
Further detail on Senior’s sustainability
progress in 2021 are set out on page 13.
• Amongst other sustainability successes, in
2021, Senior maintained its CDP leadership
rating of A- for climate disclosure. CDP have
also recognised Senior’s efforts in 2021 by
awarding us Supplier Engagement Leader
status based on our Supplier Engagement
Rating (SER).
• We are also committed to implementing the
recommendations of the TCFD. See page
18 to 23 for our update on TCFD.
The desirability to maintain a reputation
for high standards of business conduct:
• The Board acknowledges its responsibility for
setting and monitoring the culture, values and
reputation of the Company. For Senior, our
core Values underpin our culture. During the
year, the Board considered Senior’s culture in
its decision-making and discussions (further
details on this can be found on page 26).
44
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
• The Board is accountable for the oversight
of a broad Corporate Framework which
establishes the unmistakable expectation
that Senior will operate with integrity, respect
and morality in every aspect of its business.
The framework includes a comprehensive
Code of Conduct, which provides clear
guidance on behavioural expectations across
multiple facets of the business, including a
zero tolerance towards bribery and corruption,
adherence to all applicable trade compliance,
competition and anti-trust regulations, a safe,
diverse and inclusive workplace, accurate and
complete business records and protection of
company data and assets. The framework
also provides for a whistle-blowing channel
that allows stakeholders to confidentially and
anonymously report suspected unethical
or illegal corporate conduct. All reported
whistle-blowing incidents and any resulting
actions are reviewed and monitored by the
Board and Audit Committee. The Board, via
the Audit Committee, also receives regular
reports regarding compliance training
programmes, Corporate Framework updates,
sanctions and trade compliance matters and
incidents of fraud or suspected fraud. Read
more on pages 78 to 79 for our Corporate
Governance Report.
Interests of the Company’s employees
and the need to foster the Company’s
business relationships with customers,
suppliers and others:
• The Board and its committees understand
the strategic importance of stakeholders to
Senior’s business. When making decisions,
the Directors have regard to the interest of
colleagues, and the need to foster business
relationships with other key stakeholders.
We acknowledge that not every decision
we make will necessarily result in a positive
outcome for all our stakeholders; the Board
therefore has to balance competing interests
in reaching its decisions.
• While the Board engages directly on some
issues with stakeholders, there are other
engagements that happen below Board level.
Nevertheless, the Board is well informed
of these engagements and this helps it
understand how our operating businesses
affect our stakeholders’ interests and views.
More detail on how we engage with our key
stakeholders (including our customers and
suppliers) can be found on pages 40 to 43.
For further details on how the Board operates
and makes decisions, and its activities this
year, see pages 41 to 43.
STRATEGIC REPORT • Our colleagues are vital to our success and
they are always considered in the Board’s
discussions and decision-making process.
During 2021, the wellbeing of our colleagues
across the Group has remained a priority.
The Board continued to monitor the
organisation’s response to Covid, how the
Company continued to operate effectively
in the ever-changing situation and created
a safe working environment in the various
jurisdictions in which we operate. Other than
in geographies with government mandated
shutdowns, our operations have continued
to function throughout the pandemic and
we have implemented appropriate measures
and protocols to keep people safe. In order to
ensure that the Board considers the impact
of their decisions on employees across the
group, the Board receives regular feedback
regarding people and culture. A key element
of this in 2021 was the wealth of information
provided by the global engagement survey.
The Group Chief Executive Officer and Group
HR Director shared the survey feedback with
the Board, highlighting key themes, strengths,
areas for improvement and action plans.
In addition, Celia Baxter, the non-executive
Director designated to engage with
employees spent time reviewing the data
in more detail and has continued with our
programme of focus groups, managing to
engage in person while complying with Covid
guidelines. Read more on our employees
on pages 24 to 25 and 41.
The need to act fairly between members
of the Company (shareholders):
• During the year, the Board, the Group Chief
Executive Officer and Group Finance Director,
and the Director of Investor Relations and
Corporate Communications held various
meetings with investors (see page 43
for more detail on our engagement with
shareholders). These meetings gave
investors the opportunity to discuss views
on financial and operational performance,
capital investment, capital allocation policy,
end market fundamentals, and strategy.
In discharging our section 172 duties, the
Directors have regard to the factors set
out above and any other factors which we
consider relevant to the decision being made.
We acknowledge that every decision we make
will not always result in a positive outcome for
all of our stakeholders. However, by considering
the Company’s Purpose, Vision and Values,
together with our Strategic Priorities and having
a process in place for decision-making, we aim
to ensure that our decisions are considered
and proportionate.
Further details on how the Board operates and
reflects stakeholder views in its decision-making
are set out in the Corporate Governance Report
on pages 66 to 67.
NON-FINANCIAL INFORMATION STATEMENT
In compliance with the Non-Financial Reporting requirement set out in sections 414CA and 414CB of the Companies Act 2006, the table below
illustrates where our stakeholders can find information in respect of non-financial matters. The due diligence carried out for each policy is
contained within each policy’s documentation.
Reporting
Where to find it
Environmental Matters
• Sustainability: Environmental, Social and Governance (ESG) Pages 12 to 29 and www.seniorplc.com/sustainability
Employees
• Employee Engagement
Pages 24 to 25, 35, 41, 54, 73
• Health, Safety and Environment Policy
www.seniorplc.com
• Talent Management
• Equality, Diversity and Inclusion
• Code of Conduct
• Whistle-blowing Policy
Pages 35, 42, 54, 77
Pages 24, 27, 35
Pages 24, 26, 28, 55 and www.seniorplc.com
Pages 28, 75, 78 and www.seniorplc.com
Social Matters
• Community Engagement
Pages 26, 42, 67
Respect for Human Rights • Statement on Anti-Slavery and Human Trafficking
Page 78
• Anti-bribery and Anti-corruption Policy
• Modern Slavery Statement
• Responsible Supply Chain Policy
Pages 28, 44, 55, 78
www.seniorplc.com
Page 78 and www.seniorplc.com
Business model
Principal risks
KPIs
• Business Model
• Risks and Uncertainties
• KPIs
• Non-Financial KPIs
For more information please visit: www.seniorplc.com
Pages 30
Pages 48 to 55
Page 47
Page 46
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
45
KEY PERFORMANCE
INDICATORS
NON-FINANCIAL METRICS
The Group’s non-financial objectives are
as follows:
• to reduce the Lost Time Injury Illness Rate
(per 100 employees) to 0.3 by 2025; and
• to reduce the absolute Scope 1 and 2
Greenhouse Gas (“GHG”) emissions by
30% by 2025 (compared to 2018 base year).
The key performance indicators (“KPIs”) are
determined as follows:
• CO2 emissions is an estimate of the Group’s
carbon dioxide emissions in tonnes
equivalent; and
• lost time injury illness frequency rate is the
number of OSHA (or equivalent) recordable
injury and illness cases involving days away
from work per 100 employees.
The Group collects its environmental data in
accordance with the guidelines specified by
the Global Reporting Initiative (“GRI”), to the
extent that this is currently practicable, and
has applied the greenhouse gas conversion
factors contained within the Energy Agency
and US EPA conversion factors 2021.
The Group has used the financial control
approach to define its organisational boundary
and reports data from its wholly-owned or
majority-owned operations. Billed or metered
sources represent the basis of the majority
of our greenhouse gas emissions.
Senior is on track to meet our 2025 targets
for Scope 1 & 2 GHG emissions and lost time
injury illness rate. Further details of the Group’s
performance record in this regard, including
its long-term performance trends, are shown
on pages 14 to 17.
The Group highlights five financial and
two non-financial metrics to measure
progress in implementing its strategy.
Carbon dioxide emissions
Scope 1 & 2 (market based)
(Total tonnes CO2e)
19% decrease
from 2018 base year
i
i
s
n
o
s
s
m
E
d
e
s
a
B
t
e
k
r
a
M
2
&
1
e
p
o
c
S
46,747
46,540
60,000
57,418
56,992
50,000
40,000
30,000
20,000
10,000
0
2018
2019
2020
2021
Target
Total tonnes CO2e
In 2021, our absolute Scope 1 and 2 Greenhouse Gas (“GHG”) emissions reduced from
57,418 tCO2e (2018) to 46,540 tCO2e. We are on track to meet our SBTI 2025 target with
a 18.9% reduction against our 2018 base year.
Lost Time Injury Illness Rate
(incidents per 100 employees p.a.)
0%
l
s
e
e
y
o
p
m
e
0
0
1
r
e
p
e
t
a
R
2.0
1.5
1.0
0.5
0.0
1.78
1.69
1.50
1.09
1.17
0.67
0.50
0.44
0.32
0.32
2017
2018
2019
2020
2021
Total Recordable Injury Illness Rate
Lost Time Injury Illness Rate
We remain on track to reach our 2025 Target to reduce our Lost Time Injury Rate to 0.30.
In 2021 we reduced our lost time injuries from 21 to 18. The end of year Lost Time Injury Rate
was steady at 0.32, a similar result to 2020 as we had less employees in the Group as a
consequence of the divestiture of the Connecticut business and other staffing changes.
Increased
Decreased
Unchanged
46
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
STRATEGIC REPORT
FINANCIAL METRICS
The Group’s financial objectives are as follows:
• to achieve organic revenue growth (at
constant exchange rates) in excess of the
rate of inflation;
• to increase the Group’s return on revenue
margin each year;
• to increase adjusted earnings per share
on an annual basis;
• to generate sufficient cash to enable the
Group to fund future growth and to follow
a progressive dividend policy; and
• to maintain an overall return on capital
employed in excess of the Group’s cost
of capital and to target a pre-tax return in
excess of 13.5% on a post IFRS 16 basis.
The key performance indicators (“KPIs”)
are determined as follows:
• organic revenue growth is the rate of growth
of Group revenue, at constant exchange
rates, excluding the effect of acquisitions
and discontinued activities;
• return on revenue margin is the Group’s
adjusted operating profit divided by revenue;
Organic revenue
growth (£m)
-5.5%
-1.9% excluding
disposal
20
21
697
659
Net cash from operating
activities (£m)
-44.8%
48.9
20
21
27.0
1,102
Against the backdrop of the pandemic,
the Group delivered robust net cash from
operating activities of £27.0m and is capitalised
and prepared for growth in the Group’s key
end markets.
Cash performance in 2020 benefited from
significant reductions in working capital as
customer demand reduced.
As discussed in the Group Chief Executive
Officer’s Statement, the coronavirus pandemic
continued to impact on the Group’s end market
and customers, particularly in civil aerospace.
The impact on the Divisions is set out in the
Divisional Reviews, on pages 56 to 59. The
overall reduction in Group revenue was a result
of lower revenues in Aerospace partly offset
by higher revenues in Flexonics year-on-year.
• adjusted operating profit is defined in
Return on revenue margin (%)
Return on capital employed (%)
Note 9;
• adjusted earnings per share is defined in
Note 12;
• net cash from operating activities is available
from the Consolidated Cash Flow
Statement; and
• return on capital employed is the Group’s
adjusted operating profit divided by the
average of the capital employed at the start
and end of the period, capital employed
being total equity plus net debt (defined
in Note 32c).
+40bps
20
21
0.5
0.9
+50bps
20
21
0.5
1.0
Return on capital employed (“ROCE”)
increased to 1.0%. The increase in ROCE was
mainly as a result of the increase in adjusted
operating profit compared to prior year.
The Group’s adjusted operating margin
increased by 40 basis points, to 0.9% for the
full year. This improvement in profitability
reflected the savings delivered from the
restructuring programme as well as our focus
on cost management activities and mitigated
the drop through impact of the reduction
in revenue.
Adjusted earnings/(loss) per share
n/m
20
21
(0.84)
0.17
The weighted average number of shares,
for the purposes of calculating undiluted
earnings per share, increased to 415.7 million
(2020 – 414.9 million). The increase arose
principally due to vesting of shares held by
the employee benefit trust during 2021. The
adjusted earnings per share was 0.17 pence.
The year-on-year improvement arose from
improved profitability.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
47
RISKS AND UNCERTAINTIES
The Group continues to leverage and adapt its risk
and assurance framework to meet new challenges
presented by the evolving COVID-19 pandemic.
OUR APPROACH TO RISK
MANAGEMENT
Identifying and effectively managing risks is
essential to the achievement of the Group’s
strategic priorities and supporting the Group’s
sustainability initiatives. The Group’s Business
Model is described on page 30, our Strategic
Priorities are on page 34 and Sustainability
starts on page 12.
The Board is responsible for the Group’s
integrated risk and assurance framework,
ensuring that the Group risk process and
systems of internal control are robust,
continuously monitored and evolve to address
changing business conditions and threats.
The Board also provides direction and sets the
tone on the importance of risk management.
Responsibility for the monitoring and review
of the effectiveness of the Group’s risk and
assurance framework has been delegated by
the Board to the Audit Committee. The risk
process is reviewed and agreed annually with
the Audit Committee. The Head of Risk and
Compliance delivers a comprehensive report
of risk, assurance and compliance activities
at each Audit Committee meeting.
The Group embeds risk management within
its existing business processes across all levels
within the Group. Risk tolerance is reflected
throughout our control framework by way of the
Group’s delegation of authority, code of conduct
and internal controls system. A catalogue of
approximately 50 identified risks encompassing
strategic, financial, operational, environmental
and other external risks serves as the
foundation for comprehensive risk assessments
completed by every operating business and
by the Executive Committee as part of the annual
strategic planning process. The risk assessments
also consider emerging risks as detected through
internal workshops and external sources.
Emerging risks are risks which may develop but
have a greater uncertainty attached to them in
terms of likelihood, timing and velocity. Emerging
risks are monitored and formally added to the
identified risk catalogue when the risk solidifies
within the Group’s strategic planning horizon.
The Group also conducts functional risk
assessments, targeting areas such as fraud, tax
evasion facilitation and climate change. The risk
assessment specific to climate change follows
the Group’s standard risk assessment process
but considers an extended time horizon, with
some elements contemplated over a 20+ year
time frame, and applies Scenario Analysis to
the most material transition and physical risks.
Climate-related risks are also considered as part
of the overall Group risk assessment completed
during the annual strategic planning process
and rank as one of the Group’s principal risks.
During the risk assessment process, all
identified risks are evaluated against our
purpose, strategy and values to understand their
likelihood and impact of occurrence, resulting in
a register of principal risks. Once the principal
risks have been identified, mitigating controls
and relevant policies are documented and
additional mitigating actions are developed
where appropriate. An owner is assigned
to each action. The operating business risk
registers are refreshed regularly and reviewed
by Divisional Management and the Executive
Committee. The Executive Committee conducts
its risk assessment twice a year and the
principal risks are discussed at each Executive
Committee meeting. Every principal risk is
assessed for our financial viability scenarios,
to see if they could have a material financial
impact, either on their own or if they
materialised together.
The Board performs robust, semi-annual
assessments of the principal and emerging risks
facing the Group. In addition, the Board regularly
assesses outputs from the integrated risk and
assurance framework and takes comfort from
the “three lines of defence” risk assurance
model. The first line represents operational
management who own and manage risk on
a day-to-day basis, utilising effective internal
controls. The Group Executive Committee and
Divisional Management monitor and oversee
these activities, representing governance
and compliance at the second line.
The third line is the independent assurance over
these activities provided by internal and other
external assurance. The internal assurance
programme includes a combination of broad
scope internal audits, evaluating financial, IT,
HR and other operational controls, plus limited
scope thematic reviews designed to provide
assurance over targeted risk areas. Internal
audits are conducted either in person or
virtually, with all Group businesses audited on a
multi-year rotational schedule based on various
factors, including site specific risks, prior audit
results and changes within local management.
Thematic reviews are deployed across a cross
section of the Group dependent on the risk
being targeted. In addition, all Group businesses
must complete an annual Controls Self
Assessment, allowing the Group to identify
and address gaps in compliance with the
Group’s governance policies and internal
control standards. Divisional Management,
the Executive Committee and the Audit
Committee monitor the completion progress
of improvement actions resulting from internal
audits, thematic reviews and the Controls
Self Assessment.
The key elements of the Senior risk
management process are shown opposite.
48
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
2021 AT A GLANCE
Risk Management
• The Board completed two comprehensive
risk assessments, encompassing both
principal and emerging risks
• Completed “deep dive” Information
Technology/Information Security
assessments across nine critical Group
operating businesses and the Group
head office
• Introduced new annual risk assessment
programmes focused on climate change
and tax evasion facilitation
Assurance
• Completed broad scope audits with
nine operating businesses (eight virtual,
one on site)
• Information Security assurance reviews
conducted across a cross section of the
Group businesses
• Deployed thematic audits to address
specific risks related to the Group’s
Controls Self Assessment process,
contract review and Divisional
Management approvals
Principal Risks (starts on page 50)
• Pandemic: The Group continues to
adapt its COVID-19 response, including
vaccination clinics for employees, flexible
leave policies and adaptable “return to
office” plans
• Cyber/Information Security: Vulnerability
management and threat monitoring systems
have been implemented to improve the
Group’s resilience to threats and attacks
LOOKING FORWARD
Risk Management
• Review our risk tolerance structure to
ensure tolerance thresholds remain
appropriate as the Group continues
through recovery and growth phases
for our end markets.
• Refine our information security and
data privacy risk management process
• Expansion of risk management activities
related to climate change in support
of the Group’s efforts to comply with
TCFD requirements
Assurance
• Broad scope audits planned for 10
locations with a focus on resuming on-site
audits where possible
• Information Security assurance reviews to
be conducted with six operating businesses
• New thematic audits covering trade
compliance, supply chain challenges and
personal data protection
Principal Risks (starts on page 50)
• Supply Chain Challenges: Close co-
ordination with suppliers and customers
is critical to build resilience to ongoing
supply chain disruptions
• Inflation: Mitigating rising inflationary
pressures has come into sharp focus
• Talent and Skills: Labour market shortages
may challenge the Group’s ability to align
staffing with production requirements
STRATEGIC REPORT KEY RESPONSIBILITIES
WITHIN THE RISK
MANAGEMENT
STRATEGY
The Board
• Has overall responsibility for
ensuring the Group risk
management process and systems
of internal controls are robust and
continually monitored
• Formulates the Group’s strategy
and defines the Group’s risk
appetite and culture
• Monitors the nature, extent and
management of risk exposure for
the Group’s principal and
emerging risks
• Provides direction and sets the
tone on the importance of risk
management
Audit Committee
• Supports and challenges the Board
in monitoring risk exposure in line
with its Terms of Reference
• Reviews the effectiveness of the
Group’s risk management and
internal control systems and reports
to the Board for consideration
Executive Committee and
Divisional Management
• Development and implementation
of strategy, operational plans,
policies, procedures and budgets
• Monitoring of operating and
financial performance including
prioritisation and allocation
of resources
• Assessment and control of risk –
including emerging risks
Group Corporate Functions
• Lead and co-ordinate Group risk
and control related processes
• Assesses and supports the Group
in mitigating the Group’s risks
through policies and procedures,
control self-assessments, specialist
support, business reviews and
other activities
Operating Units
• Operational units identify,
assess and mitigate their key risks
• Risk assessments are reviewed
and discussed by Divisional
Management
6.
Risk reporting and review
The status of the most significant
risks, top down and bottom up,
are regularly reviewed to ensure
any changes to the risk profile
are captured and acted upon.
The consolidated risk, assurance
and control position is reported
to the Audit Committee
and the Board.
5.
Monitor and assure
The most significant risks are
regularly reviewed. Second line
assurance and internal audit activity
is conducted to assess whether key
controls are effective and risks
mitigated to an acceptable level.
Timely implementation
of resulting actions
is monitored.
1.
Identify risks
The risks to the achievement of
the Group’s strategic priorities are
identified from a top down and
bottom up perspective. Existing and
emerging risks are considered.
SENIOR’S RISK
MANAGEMENT
PROCESS
4.
Risk response planning
Based on the controls and
processes already in place the net
risk from an impact and likelihood
perspective is evaluated. Where the
net risk is considered to be higher
than the Group’s tolerance level for
that risk, additional mitigating
actions are identified and
owners assigned.
RISK HEAT MAP (Residual risk after mitigations)
1
13
10
3
9
4
5
7
8
12
11
2
6
h
g
H
i
e
c
n
e
r
r
u
c
c
O
f
o
t
c
a
p
m
I
w
o
L
Low
2.
Evaluate gross
(inherent) risks
The gross level of risk, considering
impact and likelihood, to the
achievement of the strategic
priorities is assessed.
3.
Identify existing controls
and processes
The existing controls and processes
which mitigate the risks are
identified and assessed for
adequacy.
Risk Definitions
Strategic
1 Pandemic
2 Climate Change
3 Economic and Geopolitical
4
5
Impact
Implementation
of Strategy
Innovation and
Technological Change
Operational
6 Supply Chain Challenges
7 Cyber/Information Security
8 Programme Management
9 Customer Demand and
Price-Down Pressures
People and Culture
10 Talent and Skills
Financial
11 Inflation
12 Financing and Liquidity
Compliance
13 Corporate Governance
Likelihood of Occurrence
High
Breach
Increased Residual Risk
Decreased Residual Risk
Residual Risk Unchanged
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
49
RISKS AND UNCERTAINTIES CONTINUED
PRINCIPAL GROUP RISKS
During 2021, an assessment of the principal risks and uncertainties,
including emerging risks, that could threaten the Group’s business model
or achievement of the strategic priorities has been performed. As a result
of this assessment, Supply Chain Challenges and Inflation were added to
the Group’s principal risks. Inflationary pressures on labour and material
costs are having an impact to varying degrees across the Group and
supply chain disruptions have developed due to labour shortages, logistical
delays and material availability constraints. The Group has responded
quickly with mitigating actions to manage these growing risks, primarily
through close communication with customers and suppliers, internal
efficiency improvements and cost reduction initiatives. The remainder of
the principal risks remain unchanged since our 2021 Interim Statement.
Principal Risk
STRATEGIC
How we manage it
Focus in 2021
Pandemic
2 3 6 A B C D E
• The Group has an Incident Response Plan and this is
being used to manage the Group’s response to the
current pandemic.
• Emerging threats are monitored and advice provided to
employees as appropriate. This may include travel
restrictions, temporary site closures and additional safety
measures when at work.
• Where a pandemic threat does emerge, we liaise with
our suppliers and customers to manage the situation to
the greatest extent possible.
A pandemic, such as the current
COVID-19 pandemic, could have a
significant impact on business
operations affecting our employees,
our supply chain and ultimately
our ability to meet customer
requirements. There is also the
potential for a pandemic to create
a global slowdown in demand
impacting our end markets.
An adverse indirect consequence
may result from our customers
having to reduce production rates
even where our supply chain and
production remains intact.
Climate change
2 5 B F G
There is a risk that climate change
and/or the measures taken to address
it may have an adverse impact on the
Group. Climate change may result in
extreme weather events that may
impact on our ability, or that of a
supplier, to meet our customers’
requirements.
Our customers’ products may evolve
to require new technology, such as
electrification. This also presents an
opportunity to the Group to be
involved in replacement technologies.
Increasing legislation aimed at
accelerating decarbonisation may
increase our operating costs. It may
also change consumer behaviours
impacting on our end markets.
For example, consumers may fly
less often.
• To mitigate the impact of catastrophic events, such as
an extreme weather event, each site has a scenario-
based Business Continuity Plan which is tested on an
annual basis. The Group also has insurance which helps
to protect profits in such situations.
• The Group continues to invest in and develop solutions
relevant to changing end markets. Examples include our
battery cooling, waste heat recovery, heat sink in hybrid
cars technologies, and additive manufacturing solutions
for aerospace.
• In 2020, the Group became the first company in the
global Aerospace & Defence sector to have its
emissions reduction targets independently verified
and approved by the Science Based Target Initiative
(“SBTi”). The SBTi is a partnership between CDP,
the United Nations Global Compact (“UNGC”),
World Resources Institute (“WRI”) and the Worldwide
Fund for Nature(“WWF”). The targets covering GHG
emissions from the Group’s operating businesses are
consistent with reductions required to limiting climate
warming to 1.5°C and are aligned with Net Zero as
Near-Term Targets.
• SBTi have approved the following targets:
– The Group commits to reduce its absolute Scope 1
and 2 GHG emissions by 30% by 2025 compared
to a 2018 base year; and
– For Scope 3 GHG emissions, The Group also commits
that 80% of its suppliers by spend, covering
purchased goods and services and capital goods,
will have science-based targets by 2025.
50
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
This risk continues to have a significant impact on the
Group, with new challenges arising as the current
pandemic evolves. Response measures enacted in 2020
have continued in 2021, including the ongoing activities
of the Group’s Coronavirus Oversight Committee.
The focus in 2021 continued to be on:
• the health and safety of our employees. Various
operating businesses have and continue to host
vaccination clinics to support the rollout of global
vaccination programmes. The Group remains flexible
and responsive to employee needs with regards to
localised leave policies and “return to office” strategies;
• business continuity and ensuring that the business is
able to meet its financial commitments and emerge
from the pandemic strongly. Further details are provided
against other principal risks as appropriate; and
• ongoing communications with suppliers and customers
as we adapt our business to address shifts in demand
created by the evolution of the pandemic. In addition,
our focus now includes careful management of the
Group’s response to demand increases to ensure the
cost savings measures implemented in 2020 and 2021
are not diluted.
The Group remains vigilant to the potential future impacts
of future waves of the ongoing pandemic.
In 2021, the Group maintained a “leadership” rating of
A- in 2021 from the globally recognised CDP for our
climate change disclosures.
In support of our Science Based Targets, the Group has
achieved an 19% reduction in combined Scope 1 and 2
carbon emissions through 2021, on track to meet the 2025
target deadline.
The Group engaged with over 300 of its leading suppliers
regarding climate change, with 94 of these suppliers
providing a full disclosure on their climate change
programmes. As a result, CDP named the Group as a 2021
Supplier Engagement Leader in recognition of our efforts
to raise the level of climate action across our supply chain.
A comprehensive climate change risk and opportunity
assessment exercise was conducted, addressing
transitional and physical risks, as well as resource
efficiency opportunities. The assessment considered an
extended time horizon, with some elements contemplated
over a 20+ year time frame. The exercise also applied
Scenario Analysis to the most material transition and
physical risks as per TCFD.
For further details on Sustainability and TCFD, please see
pages 12 to 23.
STRATEGIC REPORT
The principal potential risks and
uncertainties, together with actions that
are being taken to mitigate each risk, are:
Areas of strategic priorities
Key Performance Indicators
1 Enhance business model
A Organic Revenue Growth
Increased residual risk
Decreased residual risk
Residual risk unchanged
New risk
Emerging risk
2 Focus on growth
B Return on Revenue Margin
3 High performance operating system
C Adjusted Earnings per Share
4 Competitive cost countries
D Net Cash from Operating Activities
5 Capital deployment
E Return on Capital Employed
6 Talent and development
F Carbon Dioxide Emissions
G Lost Time Injury Illness Rate
All of the Group’s principal risks are factored into the severe but plausible downside
scenario applied in the Group’s viability assessment as described on page 64.
Principal Risk
How we manage it
Focus in 2021
Economic and geopolitical impact
2 3 4 5 A B C D E
• Divisional Management and the Executive Committee
closely monitor economic and geopolitical trends that
may impact the operating businesses through regular
business reviews. Contingency planning is undertaken
to minimise operations disruption where necessary.
• The Group has a Brexit Committee which continues
to monitor the ongoing impact of the Brexit transition
from regulatory, supply chain, people and financial
perspectives.
• The Board ensures that it is kept informed of US trade
developments and Brexit so that it can assess the
impact on the Group and take action as appropriate.
• The Group monitors potential changes to international
tax regulations and tariffs to understand the likely impact.
The COVID-19 pandemic continues to have a significant
impact on the global economy and sectors within which
we operate. As a result, the Group has continued to focus
on cash preservation, completion of restructuring projects,
as described in the Strategy and Portfolio Management
risk, and agreeing covenant relaxations with the Group’s
lenders, as described in the Financing and Liquidity risk.
The Group Brexit committee continues to monitor the
ongoing Brexit transition and review the appropriateness
of planning measures taken for people, regulatory and
other measures. The Group successfully implemented
the necessary procedural changes to ensure a
smooth transition, such as modified VAT and Customs
processes and support for employees applying to the
EU Settlement Scheme.
There is a risk that there will be a
global economic downturn impacting
some or all of the sectors within which
the Group operates.
Trade relations, for example imposing
of tariffs in the US, the UK leaving the
EU and other likely geopolitical events
have created uncertainty over the
future impact on international trade
and the ability to retain and recruit
foreign nationals.
Shifts in political regimes and
government spending programmes
can lead to higher taxation and have
an impact on earnings.
These events may result in supply
chain disruptions, rising energy prices
and labour shortages which can
escalate inflationary pressure on
earnings. Additional detail regarding
our inflation risk and responses can
be found on page 54.
Implementation of Strategy
1 2 3 4 5 B D E
An inability to implement the Group’s
strategy and/or effectively manage
the Group’s portfolio could have a
significant impact on the Group’s
ability to generate long-term value
for shareholders.
Ambiguity surrounding the Group’s
strategy and strategic priorities
may result in investors failing to
recognise the value of the Group’s
investment case.
• The Group regularly reviews its strategy and portfolio
to ensure that long-term value is maximised for
shareholders. Where appropriate, divestments will
be considered.
• M&A opportunities continue to be evaluated and
discussed at the Board’s strategic review. Processes are
in place to ensure that the Group is aware of emerging
acquisition opportunities.
• The Group has a well-established M&A framework that
includes proven valuation, due diligence and integration
processes designed to be efficiently executed by an
experienced cross-functional team.
• Post-acquisition reviews are conducted as appropriate.
• The Group has incorporated the experiences gained from
navigating strategic challenges, such as the COVID-19
pandemic, into an adaptable response framework to
ensure sufficient focus remains on the Group’s core
strategic priorities while responding to critical operational,
strategic and financial challenges.
The Board carried out a robust assessment of our strategic
objectives, end markets, capabilities and technologies and
determined that the Group is well positioned to deliver its
strategy and continue the transition through the evolving
net zero world.
The Group has focused on:
• continued investment in new technology and product
development in the areas of fluid conveyance, thermal
management and additive manufacturing which will
help us to emerge strongly as recovery from the
pandemic occurs;
• liquidity, effective cash management and further
strengthening of the balance sheet; and
• the Group’s Prune To Grow strategy with the transfer
of our Netherlands Aerospace business product lines
to our French Aerospace businesses, the closure of
our Flexonics business in Malaysia and the strategic
divestment of the Senior Aerospace Connecticut
helicopter business.
We hosted a CMD in October 2021 presented by key
business and technical leadership from across the Group.
This provided detailed insight into our strategic objectives
and capabilities.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
51
RISKS AND UNCERTAINTIES CONTINUED
Principal Risk
How we manage it
Focus in 2021
Innovation and technological change
1 2 5 A B C E F
The Group must innovate in order to
continue to win new business and
achieve profitable growth. There is
a risk that the Group does not
continue to innovate and implement
technological change resulting in its
technology becoming uncompetitive
or obsolete.
New technologies may have an impact
on the Group’s markets, e.g. electric
vehicles and hydrogen aircraft.
• The Group has a Technology Collaboration forum which
meets regularly to discuss innovation and technological
change.
• The Group has continued to invest in capabilities, (design
and advanced manufacturing “AM” processes), process
certifications and equipment at its Advanced Additive
Manufacturing Centre “AAMC”. Multiple AM parts
have been qualified and delivered to customers for both
production platforms and ground tests. The AAMC team
also re-engineers existing product designs to deliver
significant weight savings and performance
enhancements.
• The Group continues to develop products to support the
move to low carbon technologies, both in the land
vehicle and aerospace markets.
• Global Marketing Teams are engaged to ensure that
customer requirements and priorities are considered.
• The Group continues to invest in machining and
fabrication technology enhancements to improve
process efficiency and reduce cost.
• The Senior Operating System continues to deliver best
practice tools for innovation and product development
across the Group.
Despite the ongoing challenges in its business environment
in 2021, the Group has continued to invest in new and
emerging technologies with progress being made on a
number of key projects:
• the Technology Collaboration forum’s charter has been
revitalised to support the Group’s strategic focus on
Thermal Management and Fluid Conveyance applications
for both Aerospace and Land Vehicles/Industrial markets;
• technology Roadmaps have been established for process
and product development for both Aerospace and
Flexonics divisions. These roadmaps and progress made
on current projects are reviewed on a quarterly basis;
• expanded use of non-metallic (polymer) AM for
low-pressure applications; and
• introduced several innovative products for battery and
fuel cell cooling, including ultra-thin patented designs
for very demanding environments.
Renewed focus on sustainability as a driver for new product
development and market expansion through leveraging
existing capabilities, expertise and products in Thermal
Management and Fluid Conveyance into new adjacent
markets such as space, hydrogen etc.
OPERATIONAL
Supply chain challenges
1 2 3 4 A B C D E
Suppliers may be unable or unwilling
to respond to increases or decreases
in demand, impacting our ability to
supply our customers and/or our ability
to optimise inventory held.
Critical materials or components may
become temporarily or permanently
unavailable, leading to an inability
to meet production commitments.
Supply chain disruption can lead to
higher volatility in delivery schedules
as customers adjust demand to
protect their production capabilities.
This may challenge the Group’s ability
to meet customer schedule, quality
and cost requirements, resulting
in potential delays, penalties and
cost overruns.
In extreme cases some suppliers may
face financial difficulties and go out
of business.
• The resilience of the supply chain is monitored and,
where possible, over-reliance on individual suppliers
is reduced.
• The Group closely monitors the resource required to
The world is experiencing significant supply chain
disruption resulting from labour challenges, material
shortages and transportation delays. Focus in 2021 has
been on:
deliver customer demand.
• The Group has deployed the Senior Operating System
to provide operating businesses with a toolkit to
optimise the use of lean and continuous improvement
techniques, supplier management and other operational
best practice processes.
• Operating businesses are required to maintain strong
internal controls over supplier management from new
supplier selection to performance monitoring and
management of existing suppliers.
• Our core Values (see page 30) emphasise operating
with integrity and respect, which allows the Group
to cultivate strong, long-term relationships with
critical suppliers.
• maintaining close and frequent communication with
customers regarding delivery schedules, the need
to qualify additional supply sources and potential
incremental costs to mitigate supply chain disruptions;
• working with suppliers to manage lead times and
maximise the benefits from long-term supply
agreements, where applicable;
• leverage supplier relationships across the Group to
identify alternate supply sources and opportunities to
streamline or consolidate supply requirements;
• utilise the Senior Operating System and our engineering
expertise to generate innovative solutions to supply
chain challenges; and
• increased focus on supply chain challenges in operating
business reviews, as well as in Executive Committee
and Group Procurement Council meetings.
52
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
STRATEGIC REPORT
The principal potential risks and
uncertainties, together with actions that
are being taken to mitigate each risk, are:
Areas of strategic priorities
Key Performance Indicators
1 Enhance business model
A Organic Revenue Growth
Increased residual risk
Decreased residual risk
Residual risk unchanged
New risk
Emerging risk
2 Focus on growth
B Return on Revenue Margin
3 High performance operating system
C Adjusted Earnings per Share
4 Competitive cost countries
D Net Cash from Operating Activities
5 Capital deployment
E Return on Capital Employed
6 Talent and development
F Carbon Dioxide Emissions
G Lost Time Injury Illness Rate
All of the Group’s principal risks are factored into the severe but plausible downside
scenario applied in the Group’s viability assessment as described on page 64.
Principal Risk
How we manage it
Focus in 2021
Cyber/information security
1 3 B
The risk that the Group is subjected to
external threats from hackers or
viruses potentially causing critical or
sensitive data to be lost, corrupted,
made inaccessible, or accessed by
unauthorised users, resulting in
financial and/or reputational loss.
• The Group has a roadmap to achieving improved
Information Security.
• The Group has security controls in place including
policies, standards and playbooks.
• Each operating business has a security champion to
assist in raising employee awareness to this risk.
• Vulnerability metrics have been developed and are
actively reviewed by Divisional Management and the
Executive Committee.
• The Group has a risk management framework specific to
Information Technology “IT”/Information Security “IS”.
• Each operating business deploys a suite of protection
and monitoring services, including endpoint detection
and response, vulnerability management and cyber
threat intelligence.
• The Group hosts an annual IT/IS conference with
participants from all operating businesses.
• Employees receive annual awareness training on
cyber-related issues.
Programme management
1 2 3 5 6 A B C D E
The ability to introduce new products
in line with customer requirements
and to respond appropriately to
increases or decreases in demand
thereafter is key to achieving the
Group’s strategic objectives.
There is a risk that the Group is unable
to respond quickly enough to changes
in demand, potentially resulting in
excess inventory and/or an inability
to meet schedule, quality and cost
requirements resulting in delays,
penalties, cost overruns or asset
write-downs.
• The Group is experienced in bidding and launching
new products. Formal New Product Introduction “NPI”
processes, such as Advanced Product Quality Planning
“APQP”, are used in some parts of the Group and
are being rolled out.
• There is a Group Contract Review policy which is
mandatory for all operating businesses and requires
comprehensive financial modelling and sensitivity
analysis of contractual terms and assumptions.
• NPI programmes are subject to regular review by
divisional and Group management to ensure that
schedule, cost or quality issues are identified and dealt
with promptly.
• The Group monitors market and customer data so
that we can be prepared to respond to changing
market dynamics.
Many of our employees continued to work from home
during 2021 and measures were taken to ensure that
the Group IT/IS policies continue to be followed.
These measures included the introduction of an IS audit
programme, as well as in-depth IS reviews of key operating
businesses. In addition, the global roll out of the Group’s
endpoint detection and response tool set has provided
additional monitoring of the environment.
Further progress was made in 2021 in implementing the
Group’s Information Security roadmap, including:
• completed the implementation of a third-party Managed
Security Service provider and deployment of vulnerability
management and cyber intelligence services, as well
as endpoint detection and response software;
• over 90% of employees completed on-line cyber/
information security training;
• continuation of the cyber awareness campaign,
consisting of cyber newsletters and posters to alert
employees to cyber threats;
• alerting IT teams across the Group to near misses and
incidents so they are aware of immediate threats; and
• all Information Security policies and standards
were updated.
The ongoing pandemic continued to impact customer
demand in 2021, although the recovery is underway in
some end markets. Focus in 2021 has been on:
• continuing to work with our customers to ensure that,
wherever possible, orders within firm windows can
be delivered;
• working with our suppliers and managing inventory
to optimise inventory levels where there are delays in
firm orders;
• maintaining flexible labour resource plans to adapt to
variations in demand and production schedules; and
• responding to the ongoing elevated level of new requests
for quotation.
Customer demand and price-down pressures
1 3 4 5 A B C E
Customer pricing pressure is an
ongoing challenge within our
industries, driven by the expectations
of airlines, land vehicle operators and
governments seeking to purchase
more competitively priced products
in the future. This may put some
pressure on the Group’s future
operating margins.
COVID-19 continues to impact our
end markets and there is a risk that
customers do not honour firm order
schedules, or in extreme cases,
go out of business.
• The Group works closely with its customers to find
innovative ways to produce products at a lower cost,
thus helping them to meet pricing challenges.
• The Group is able to consider bundles of products
that in total help achieve customer pricing challenges.
• There is a Group Contract Review policy which is
mandatory for all operating businesses and requires
comprehensive financial modelling and sensitivity
analysis of contractual terms and assumptions.
• Where appropriate, the Group will actively pass work to
some of its cost competitive facilities such as Mexico,
Thailand, the Czech Republic, South Africa, India,
China and Malaysia with a view to helping satisfy
customer challenges.
Customer demand strengthened during the year, driven
by the ongoing end-market recovery from the impacts of
the pandemic.
While price down pressures have continued in 2021 in
certain markets, other segments have been impacted
by supply chain disruptions, causing a shift in customer
focus from reducing price to meeting delivery schedules.
Focus in 2021 has been on:
• collaborating with our customers to continue to ensure
that, wherever possible, orders within firm windows can
be delivered;
• continuing to balance direct headcount with demand
whilst retaining the ability to meet increased demand in
the future and identifying overhead reductions through
efficiency improvements where possible; and
• pursuing new opportunities with existing and new
customers, providing some market diversification.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
53
RISKS AND UNCERTAINTIES CONTINUED
Principal Risk
How we manage it
Focus in 2021
PEOPLE AND CULTURE
Talent and Skills
2 6 A B D
There is a risk that the group will have
difficulty in retaining and recruiting
sufficient skills to respond to a
recovery in our markets and/or wages
may have to be increased to attract
new employees.
As demand increases there may be
a disproportionate increase in the
number of indirect heads, undoing
some of the cost savings that the
Group has achieved through its
restructuring programme.
Employees may leave the business
for better wages/opportunities
elsewhere.
A notable portion of the Group’s
workforce may reach retirement age
at the same time, creating a gap in
skills and labour availability.
The Group may have insufficient talent
to respond to all strategic priorities.
• Employee retention and recruitment challenges are
regularly discussed within the operating businesses,
Divisional Management and the Executive Committee.
• The Group HR Director hosts focus groups across a
cross section of the operating businesses to solicit
constructive feedback from employees and foster open
communication.
• Operating businesses partner with technical colleges
and apprenticeship schemes to create talent pipeline
programmes.
• A groupwide succession planning exercise is conducted
annually to identify successors or interim cover for
key roles and ensure appropriate development plans
are in place to support employees in meeting their
career goals.
• The Nominations Committee reviews management
development and succession plans twice a year, making
recommendations to the Board regarding size, structure
and composition where applicable.
• The “Perform” performance and development system
is utilised across the Group to facilitate objective setting,
development planning and performance and
behaviour assessment.
• The Group HR Director regularly provides people and
culture feedback to the Board.
FINANCIAL
Inflation
2 3 A B C D E
A confluence of labour constraints,
supply chain disruption and shifting
customer demand is increasing
inflationary pressures on earnings
from existing programmes.
Higher production costs resulting
from material, energy and labour
cost inflation can reduce our ability
to remain cost competitive and win
new business.
Inflationary pressures may result in
higher interest rates, which could
impact the Group’s earnings.
• The Group’s Treasury Committee actively monitors
the economic forces impacting the Group and
considers a variety of viable containment strategies
where necessary.
• There is a Group Contract Review policy which is
mandatory for all operating businesses and requires
comprehensive financial modelling and sensitivity
analysis of contractual terms and assumptions.
• A significant portion of the Group’s external debt is at
fixed rates of interest, which mitigates the effect of
higher benchmark interest rates that can result from
inflationary pressures.
The Group conducted a global employee engagement
survey in 2021, with excellent participation and
engagement from employees. The feedback from the
survey was very positive, valuable and constructive and
will be used to help implement specific action plans to
improve engagement for each operating business.
Use of the Group’s online recruitment system, “Recruit,”
was embedded across our US operating businesses
and will be expanded to operating businesses in the UK
in 2022.
The Group responded to increasing challenges in
employee retention and recruitment in 2021 by:
• evaluating market labour rates at a local level, resulting
in higher wages for new employees and the execution
of off-cycle wage adjustments for existing employees,
where appropriate;
• enhancing wellbeing offerings, such as expanded
employee assistance programmes, to provide additional
resources employees can utilise to improve their overall
physical and mental health;
• expanding the Group’s network of reputable recruiting
partners and channels, including social media
campaigns and job fairs, to broaden the pool of
candidates for open positions; and
• increasing the level of cross training amongst the
current workforce to cover gaps in labour availability.
The Group closely tracked the velocity of inflation escalation
during 2021 and responded quickly to mitigate its impact
on the Group’s financial performance where necessary.
Our efforts in 2021 included:
• where inflationary pressures have increased, the Group
has worked closely with customers to secure price
increases, delay contractual price decreases and/or pass
through higher production costs to mitigate the impact
on Group margins;
• leverage existing fixed-price supply agreements to
secure lower pricing across as much supply as possible
while continuing to maintain the Group’s inventory
optimisation progress from 2020; and
• utilise the Senior Operating System to deploy lean and
continuous improvement techniques with a focus on
improving labour efficiencies and cost reduction initiatives.
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SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
STRATEGIC REPORT
The principal potential risks and
uncertainties, together with actions that
are being taken to mitigate each risk, are:
Areas of strategic priorities
Key Performance Indicators
1 Enhance business model
A Organic Revenue Growth
Increased residual risk
Decreased residual risk
Residual risk unchanged
New risk
Emerging risk
2 Focus on growth
B Return on Revenue Margin
3 High performance operating system
C Adjusted Earnings per Share
4 Competitive cost countries
D Net Cash from Operating Activities
5 Capital deployment
E Return on Capital Employed
6 Talent and development
F Carbon Dioxide Emissions
G Lost Time Injury Illness Rate
All of the Group’s principal risks are factored into the severe but plausible downside
scenario applied in the Group’s viability assessment as described on page 64.
Principal Risk
How we manage it
Focus in 2021
Financing and liquidity
2 3 5 D E
The Group could have insufficient
financial resources to fund its growth
strategy or meet its financial
obligations as they fall due or
insufficient liquidity to meet financing
covenants.
Foreign exchange movements could
have a material impact on the Group’s
financial performance, both on the
balance sheet (translation risk) and
income statement (transaction risk).
• The Group’s overall treasury risk management
programme focuses on the unpredictability of financial
markets, and seeks to minimise potential adverse effects
on the Group’s financial performance.
• Compliance with financial policies and exposure limits
are reviewed by the Group’s Treasury Committee on
a regular basis.
• The Group enters into forward foreign exchange
contracts to hedge the exchange risk arising on
operations’ trading activities in foreign currencies;
however, it does not enter into or trade financial
instruments, including derivative financial instruments,
for speculative purposes.
• The Group’s Treasury policy is updated and approved
by the Board regularly.
• The Group’s viability assessment process considers a
base case and risk case scenario, which considers the
principal risks and uncertainties.
The Group continued to focus on this risk during 2021 to
mitigate the ongoing impacts of the COVID-19 pandemic.
Actions taken included:
• worked with the Group’s lenders, both banks and US
private placement investors, during 2020 and through to
February 2021 to agree appropriate covenant relaxations
in relation to the June 2020 through to December 2021
testing periods. The Group continues to manage leverage
accordingly and will revert to original covenant limits
for the June 2022 testing period;
• continued focus on cash preservation; no Senior plc
dividends were paid in 2021, capital expenditure
remained subdued and some delegated authorities
remain restricted;
• while inventory optimisation efforts focused on reducing
inventory levels where appropriate are ongoing, efforts in
2021 also emphasised sustaining the benefits achieved
in 2020 by responsibly managing growth in inventory
requirements where customer demand is recovering
and/or supply chain disruptions are occurring;
• extensive scenario testing was undertaken in 2021
based on a variety of end market assumptions taking
account of appropriate cost reduction and cash
preservation mitigating actions; and
• the Group’s Treasury Policy was updated and approved
by the Board in September 2021.
COMPLIANCE
Corporate governance breach
1 2 3 A B C
Corporate governance legislation
(such as the UK Bribery Act and the
US Foreign Corrupt Practices Act),
regulations and guidance (such as the
UK Corporate Governance Code and
global health and safety regulations)
are increasingly complex and onerous.
A serious breach of these rules and
regulations could have a significant
impact on the Group’s reputation,
lead to a loss of confidence on the
part of investors, customers or other
stakeholders and ultimately have
a material adverse impact on the
Group’s enterprise value.
• The Group has well-established governance policies and
procedures in all key areas, including a Group Code of
Conduct, anti-bribery procedures, a Health & Safety
Charter, an Agent’s Policy and various policies and
procedures over the review and reporting of risk
management and internal control activities.
• Governance updates are provided to the Board and
the Executive Committee at appropriate intervals,
and to key operational management.
• All employees are required to complete annual Code
of Conduct training.
In 2021, the Code of Conduct was updated and relevant
training was rolled out to all employees, with 94% of
employees having completed the training.
Additional training was conducted for appropriate employee
groups on topics including anti-money laundering, tax
evasion facilitation, trade compliance, harassment and
protecting human rights.
The Group implemented an enhanced denied party
screening tool and added export license management
capability for the US operating businesses.
• All EU sites have received training on the General Data
Updates have been issued to various Group policies.
Protection Regulations and employees in other locations
have received training as appropriate to their roles.
• The Board receives regular updates on trade
compliance matters.
The Group’s 2021 internal audit programme and Controls
Self Assessment were completed, providing a level of
assurance that the Group’s Code of Conduct, controls,
policies and procedures are being followed.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
55
DIVISIONAL REVIEW
– Aerospace
HEADLINES 2021
The Division’s operating results on a constant
currency basis are summarised below:
Revenue
£439.3m
(2020 – £498.0m)
Revenue
Adjusted
operating profit
Adjusted
operating margin
2021
£m
2020(3)
£m
Change
439.3
498.0
-11.8%
7.9
5.5 +43.6%
1.8%
1.1% +70 bps
(1) This number is excluding Senior Aerospace
Adjusted operating profit
Connecticut
£7.9m
(2020 – £5.5m)
Adjusted operating margin
1.8%
(2020 – 1.1%)
Aerospace Division
The Aerospace Division represents 66%(1)
(2020 – 70%(1) of Group revenue and consists
of 14(2) operations. These are located in North
America (six), the United Kingdom (four),
continental Europe (two), Thailand and Malaysia.
This Divisional review is on a constant currency
basis, whereby 2020 results have been
translated using 2021 average exchange rates
and on an adjusted basis to exclude the charge
relating to amortisation of intangible assets from
acquisitions, goodwill impairment and write-off
and net restructuring income/costs.
(2) This excludes Senior Aerospace Connecticut and
Senior Aerospace Bosman in The Netherlands.
(3) 2020 results translated using 2021 average exchange
rates – constant currency.
Divisional revenue decreased by £58.7m (11.8%)
to £439.3m (2020 – £498.0m) whilst adjusted
operating profit increased by £2.4m (43.6%) to
£7.9m (2020 – £5.5m).
Revenue Reconciliation
2020 revenue
Civil aerospace
Defence
Other
Disposal of business
2021 revenue
£m
498.0
(43.8)
1.0
9.8
(25.7)
439.3
Revenue in the Aerospace Division reduced
by 11.8% year-on-year on a constant currency
basis, reflecting that part of 2020 was pre-
COVID and 2020 included a full year contribution
from Senior Aerospace Connecticut. Excluding
Senior Aerospace Connecticut, which was
divested on 22 April 2021, revenue for the
full year on an organic, constant currency
basis declined by 7.1%. The year-on-year
decline reflected the reduction in civil aircraft
production rates, partly offset by growth
from semi-conductor equipment, defence
and space markets.
The civil aerospace sector was the most
impacted by the pandemic with Senior’s sales
decreasing by 15.2% compared to prior year.
This was reflective of aircraft production
rates remaining lower in 2021 compared to
pre-pandemic levels including the impact of
lower 787 production as Boeing address the
quality issues.
Excluding the divestment of Senior Aerospace
Connecticut, total revenue from the defence
sector increased by £1.0m, 0.9% during the
year, as the F-35 production rate increase was
partly offset by the timing gap between the
completion of deliveries on parts for F-35 Lot 14
and the commencement of deliveries on Lot 15
and lower military aftermarket sales in 2021.
Revenue derived from other markets such as
space, power & energy, medical and semi-
conductor equipment, where the Group
manufactures products using very similar
technology to that used for certain aerospace
products, increased by £9.8m as a result of the
increasing demand in the semi-conductor
equipment market and growth in the space
satellite sector.
Even though divisional revenue decreased in
2021, adjusted operating profit increased by
43.6% to £7.9m (2020 – £5.5m). This reflected
the drop through impact of the reduction in
revenue, mitigated by additional savings
delivered from the restructuring programme.
On an organic basis (excluding Senior Aerospace
Connecticut), the Divisional adjusted operating
margin increased by 140 basis points to 1.6%
(2020 – 0.2%).
In 2022, we expect production volumes for civil
aerospace to be higher than 2021, driven by
increasing single aisle rates. Positively, in 2021
both Airbus and Boeing confirmed plans to ramp
up single aisle production in the near-term.
14(1) Global Aerospace operations
North America(1)
United Kingdom
Continental Europe(1)
Thailand
Malaysia
6
4
2
1
1
37%
Civil
aircraft
Aerospace sales
across the Group
66%
11%
other
18%
Defence
56
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
(1) In 2021, Senior Aerospace Connecticut was divested and
Senior Aerospace Bosman in The Netherlands was closed
STRATEGIC REPORT • Airbus increased the A320 Family production
to 45 aircraft per month by the end of 2021.
They have stated that the ramp up is on
trajectory to achieve a monthly rate of 65
aircraft by summer 2023. For production rates
beyond 2023, Airbus is still in the assessment
phase and working with suppliers to
potentially enable an increase above rate 65;
recently, they have indicated that they expect
to have clarity on their 2024 and 2025
production targets by the middle of 2022.
• Boeing announced at their recent earnings
call that the 737 programme is currently
producing at a rate of 26 per month, reiterated
that it will continue to progress towards a
production rate of 31 per month in early 2022
and stated that the company is evaluating the
timing of further rate increases. Boeing have
an order backlog of around 3,400 aircraft and
there are currently 335 MAX aircraft in
inventory with the majority of these expected
to be delivered by the end of 2023. Boeing
also stated that since the FAA’s approval to
return the 737 MAX to operations in
November 2020, 299 737 MAX aircraft have
been delivered and that there are 36 operators
who have returned the 737 MAX to service.
Furthermore, the Civil Aviation Administration
of China (“CAAC”) has now issued the
appropriate airworthiness directives (“AD’s”),
clearing the way for the 737 MAX to return
to service in China in the near future.
• COMAC recently announced that its C919
aircraft is continuing its flight certification
programme and expect first delivery in 2022.
Recovery in long-haul routes, which typically
use wide body aircraft, is expected to take
longer than short-haul routes. IATA has signalled
that this segment will return to 98% of 2019
levels by 2025 and 106% of 2019 levels by 2026.
• Airbus continue to expect to increase the
A350 Family production rate, currently at an
average production rate of 5 per month, to
around 6 by early 2023. For the A330 Family,
production will increase from around 2 per
month to almost 3 per month at the end
of 2022.
• On the 787 platform, Boeing continues to
perform rework on aircraft in inventory which
has led to production being reduced to a very
low rate. This will continue until deliveries
resume, with an expected gradual return to
5 per month over time. Boeing confirmed
on their January 26, 2022 earnings call that
they will have 110 airplanes in inventory
at the end of the first quarter of 2022.
• Production of the 767 will continue at a rate
of 3 per month.
• On the 777/777X combined production rate,
Boeing announced that they will be increasing
from 2 per month in H1 2021 to 3 per month
in 2022. They are still anticipating first delivery
of the 777X in late 2023.
Business jet flight activity was resilient in 2021,
with strong leisure demand as travel restrictions
loosened. With 3.3 million flights from January
through December, business jet traffic was 7%
higher than in 2019, the previous high point for
global business jet demand, according to WingX
Global Market Tracker. Activity in 2022 is also
continuing this upward trend, with January 2022
traffic increasing 35% when compared to 2021.
In regional jets, the entry into service of
Embraer’s E175-E2 jet has been delayed
until 2027-28 although they continue to sell
the current E175 jet. Airbus reaffirmed that
production of the A220, which is currently at
around rate 5 aircraft per month, will rise to
around 6 per month in early 2022. Airbus is also
envisaging a monthly production rate of 14 by
the middle of the decade.
498.0
£m
£m
9.8
498.0
1.0
(43.8)
We expect defence revenue to be stable in
2022 with bipartisan support for US defence
spending. The strength in US military spending
(43.8)
can be primarily attributed to heavy investment
in research and development and long-term
projects such as the 5th generation F-35 Joint
Strike Fighter.
(25.7)
• Lockheed Martin delivered 142 F-35 aircraft
in 2021, which was higher than the range they
set out of 133-139. At their full year results
presentation, they reiterated their existing
production for F-35; 151-153 aircraft in 2022
and then 156 thereafter. They further stated
that the annual production may increase
beyond the planned full-rate production of
156 aircraft per year given strong recent
international order intake.
Senior has a diversified product portfolio
in the aerospace sector and the potential to
add content on existing programmes as our
customers recognise and appreciate Senior’s
financial resilience, stability, and global footprint.
Our businesses are well capitalised with
equipment that can be utilised across civil,
defence and space sectors. We have secured
new multi-year contracts and contract
extensions on defence and civil platforms
which, coupled with increasing production rates,
will help to underpin our return to growth in our
Aerospace Division in 2022 and beyond.
In 2021, new contracts of note that were
signed include:
• Senior Aerospace was awarded a multi-year
contract to supply major floor beam structural
assemblies for the Boeing 767 platform.
Production of the structural assemblies
will be undertaken from the Senior Aerospace
AMT facility in Arlington, WA, USA with
deliveries commencing January 2022.
1.0
9.8
• Senior Aerospace won a multi-year contract
to supply quadrant assemblies for flight
control systems on the Boeing 737 and
Boeing 777 platforms. The quadrant
assemblies for the Boeing 737 Elevator
439.3
Control and Boeing 777 Horizontal Stabilizer
flight control system will commence in Q1
2022 from the Senior Aerospace Damar
facility in Monroe, WA, USA.
439.3
(25.7)
Revenue by large commercial platforms
Revenue reconciliation (£m)
c. 28%
Boeing
£m
A
B
A 2020 revenue
B Civil aerospace
C Defence
A
B
C
D
E
F
D Other
F
E Disposal of business
F 2021 revenue
A 2020 revenue
E
D
C
B Civil aerospace
C Defence
D Other
E Disposal of business
F 2021 revenue
498.0
1.0
9.8
(43.8)
(25.7)
439.3
c. 72%
Airbus
Sales in defence
increased by
+1%
Adjusted operating
margin increased to
1.8%
A
B
C
D
E
F
A 2020 revenue
B Civil aerospace
C Defence
D Other
E Disposal of business
F 2021 revenue
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
57
DIVISIONAL REVIEW
– Flexonics
HEADLINES 2021
Revenue
£219.9m
(2020 – £200.0m)
Adjusted operating profit
£12.9m
(2020 – £10.5m)
Adjusted operating margin
5.9%
(2020 – 5.3%)
Flexonics Division
The Flexonics Division represents 34% (2020
– 30%) of Group revenue and consists of 12(1)
operations which are located in North America
(four), continental Europe (two), the United
Kingdom (two), South Africa, India, and China
(two) including the Group’s 49% equity stake
in a land vehicle product joint venture. This
Divisional review, presented before the share
of the joint venture results, is on a constant
currency basis, whereby 2020 results have been
translated using 2021 average exchange rates
and on an adjusted basis to exclude the charge
relating to amortisation of intangible assets
from acquisitions, goodwill write-off and net
restructuring income/costs. The Division’s
operating results on a constant currency basis
are summarised below:
Revenue
Adjusted
operating profit
Adjusted
operating margin
2021
£m
2020(2)
£m
Change
219.9
200.0
+9.9%
12.9
10.5 +22.9%
5.9%
5.3% +60 bps
(1) This figure excludes Senior Flexonics Upeca, Malaysia
following its closure.
(2) 2020 results translated using 2021 average exchange
rates – constant currency.
Divisional revenue increased by £19.9m (9.9%)
to £219.9m (2020 – £200.0m) and adjusted
operating profit increased by £2.4m (22.9%)
to £12.9m (2020 – £10.5m).
Revenue Reconciliation
2020 revenue
Land vehicles
Power & energy
2021 revenue
£m
200.0
33.5
(13.6)
219.9
Recovery is underway across some of our
Flexonics end-markets with sales in 2021
increasing by 9.9% compared to prior year.
The performance in the year benefited from the
recovery in heavy-duty truck and off-highway
and passenger vehicle markets, partially offset
by a decline in oil & gas and the closure of the
Senior Flexonics business in Malaysia.
Group sales to land vehicle markets increased
by 39.3%. Senior’s sales to the North American
truck and off-highway market increased by
£19.6m (42.9%), as off-highway sales were
strong and market production of heavy-duty
diesel trucks increased by 23%. Sales to other
truck and off-highway regions, including Europe
and India, increased by £7.6m (41.1%). Group
sales to passenger vehicle markets increased
by £6.3m (29.9%) in the year, reflecting higher
demand in our core European and Indian markets.
18%
Land
vehicles
12 Global Flexonics operations(1)
North America
Continental Europe
United Kingdom
India
South Africa
Malaysia(1)
China(2)
4
2
2
1
1
1
2
Flexonics sales
across the Group
34%
16%
Power &
energy
58
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
(1) In 2021, Senior Flexonics Upeca in Malaysia was closed.
(2) Including joint venture.
STRATEGIC REPORT In the Group’s power & energy markets,
sales decreased by £13.6m (11.9%) in the year.
Sales to oil and gas markets decreased by
£11.2m (26.7%), as a result of weaker demand,
particularly for upstream activity and also the
closure of our Senior Flexonics Upeca, Malaysia
business. Downstream oil and gas activity was
lower year-on-year because part of the prior
year was pre pandemic with higher levels of
economic activity. Some maintenance projects
continue to be deferred. Sales to other power
& energy markets decreased by £2.4m.
Adjusted operating profit increased by £2.4m
compared to prior year and the divisional
adjusted operating margin increased by 60 basis
points to 5.9% (2020 – 5.3%). This reflected
the drop through impact of growth in revenue
coupled with additional savings delivered from
the restructuring programme which more than
offset the inflationary impact of freight and
commodity costs.
Land vehicle markets are expected to continue
to grow in 2022, as supply chain constraints
gradually ease through the year.
• ACT Research is forecasting a 13% increase
in North American heavy-duty truck
production in 2022, and further growth
of 21% in 2023.
• The North American medium-duty diesel
truck production is forecast to increase by
11% in 2022.
Some positive momentum is expected in
power & energy markets now that recovery
in the upstream oil & gas sector is underway.
• Global oil demand is forecast to exceed pre
pandemic levels before the end of 2022 and
to further strengthen in 2023, in the absence
of any further COVID-related disruption.
Industry macro fundamentals, for upstream
oil and gas in particular, are looking very
favourable, due to the combination of
projected steady demand recovery, an
increasingly tight supply market, and
supportive oil prices. Nevertheless, the rise
in geopolitical tensions could have a potential
impact on the supply side.
• In power generation, the IEA forecasts
electricity demand growing by 2.7% a year on
average for 2022-2024. They also forecast the
growth of renewable capacity in the next five
years to accelerate, accounting for almost
95% of the increase in global power capacity
through 2026.
• According to the IEA, nuclear power
sustained significant growth in 2021; output
from nuclear was 8% above 2019 levels, with
emerging market and developing economies
increasing their share of global nuclear output
to almost one-third.
• IHS Markit Inc. forecasts that European truck
and bus production will grow by 7% in 2022
and that passenger vehicle production will
grow by 20% in 2022.
33.5
£m
£m
• Indian passenger vehicle production
is forecasted to grow by 7% in 2022.
33.5
200.0
200.0
(13.6)
219.9
219.9
(13.6)
Revenue reconciliation (£m)
A
B
£m
A 2020 revenue
B Land vehicles
33.5
A
B
C
D
Global energy usage will drive
increased demand for many of
the Flexonics Division’s products
C Power & energy
D 2021 revenue
C
D
A 2020 revenue
B Land vehicles
C Power & energy
D 2021 revenue
219.9
We will continue to focus our development
efforts on differentiated technology and
products, applicable across a diverse range
of attractive industrial markets. In 2021, new
contracts of note that were signed include:
• Senior Flexonics Canada was awarded an
additional contract with Bruce Power Limited
Partnership as a key supplier for their
Major Component Replacement (“MCR”)
Project to supply replacement bellows
expansion joints for critical equipment in the
primary and secondary circuits for Reactor
Units. The work will be performed at the
Senior Flexonics facility in Ontario, Canada
and Senior Flexonics Pathway facility
in Texas, USA.
• Senior Flexonics was awarded new
contracts to supply Honda with exhaust
flexible connectors for the automotive
manufacturer’s 1.5L and 2.0L gasoline
engines. To meet Honda’s demanding
performance requirements, Senior Flexonics
undertook a rigorous development to ensure
the flexible exhaust connectors met the
required durability, weight and emissions
standards. Manufacturing of these
components will be performed at Senior
Flexonics’ facilities in India and China and
deliveries have recently commenced.
• Senior Flexonics Olomouc in the Czech
Republic has secured the Group’s first
contract for a fully electric heavy-duty truck
application for one of our large European truck
customers. We will be providing electronics
cooling components.
Sales to land vehicle markets
increased by +39%
200.0
(13.6)
A
B
C
D
A 2020 revenue
B Land vehicles
C Power & energy
D 2021 revenue
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
59
FINANCIAL REVIEW
Senior delivered improved
profitability and strengthened
the balance sheet in 2021.”
Bindi Foyle
Group Finance Director
HIGHLIGHTS
Adjusted Operating Profit
£6.1m
2020 – £3.7m
Net Debt/EBITDA
1.9x
2020 – 2.8x
ROCE
1.0%
2020 – 0.5%
Financial Summary
A summary of the Group’s operating results (at reported currency) is set out in the table below.
Further detail on the performance of each Division is set out in the Divisional Review.
2021
£m
439.3
219.9
–
(0.5)
–
658.7
Revenue
2020
£m
526.2
208.3
–
(0.9)
–
733.6
Adjusted
operating profit(1)
2021
£m
7.9
12.9
0.2
–
(14.9)
6.1
2020
£m
5.9
11.0
0.2
–
(13.4)
3.7
Margin
2020
%
1.1
5.3
–
–
–
0.5
2021
%
1.8
5.9
–
–
–
0.9
Aerospace
Flexonics(2)
Share of results of
joint venture
Inter-segment sales
Central costs
Group total
(1) See table below for reconciliation of adjusted operating profit to reported operating profit.
(2) Flexonics results are presented before share of results of joint venture
Adjusted operating profit may be reconciled to the operating profit that is shown in the
Consolidated Income Statement as follows:
Adjusted operating profit
Amortisation of intangible assets from acquisitions
Goodwill impairment and write-off
Net Restructuring income/(costs)
Operating profit/(loss)
2021
£m
6.1
–
–
4.4
10.5
2020
£m
3.7
(7.7)
(134.3)
(39.0)
(177.3)
Financial detail
Group revenue
Group revenue was £658.7m (2020 – £733.6m).
Excluding the adverse exchange rate impact of
£36.4m, and the year-on-year effect of the
disposal of £25.7m, Group revenue decreased
by £12.8m (1.9%), with lower revenues in
Aerospace partly offset by higher revenues in
Flexonics year-on-year. In 2021, 60% of revenue
originated from North America, 15% from the
UK, 13% from the Rest of Europe and 12% from
the Rest of the World.
Operating profit/loss
Adjusted operating profit increased by £2.4m
(64.9%) to £6.1m (2020 – £3.7m). Excluding
the adverse exchange rate impact of £0.8m,
adjusted operating profit increased by £3.2m
(110.3%) on a constant currency basis.
After accounting for £nil amortisation of
intangible assets from acquisitions (2020 –
£7.7m), £nil goodwill impairment and write-off
(2020 – £134.3m) and £4.4m net restructuring
income (2020 – £39.0m net restructuring cost),
reported operating profit was £10.5m (2020
– £177.3m loss).
60
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
STRATEGIC REPORT
Revenue (£m)
Adjusted operating profit (£m)
Free cash flow (£m)
20
21
733.6
658.7
20
21
3.7
20
21
14.0
6.1
46.5
The Group’s adjusted operating margin
increased by 40 basis points, to 0.9% for the
full year. This improvement in profitability
reflected the savings delivered from the
restructuring programme as well as our focus
on cost management activities, which more
than offset the drop through effect of the
reduction in revenue and the inflationary impact
of freight and commodity costs. While the
impact of the pandemic and industry wide
supply chain constraints are still with us,
we continue to manage these diligently.
As set out in Note 9, adjusted operating profit
and adjusted loss before tax are stated before
£nil amortisation of intangible assets from
acquisitions (2020 – £7.7m), £nil goodwill
impairment and write-off (2020 – £134.3m) and
£4.4m net restructuring income (2020 – £39.0m
cost). Adjusted loss before tax is also stated
before corporate undertakings income of
£21.2m (2020 – £4.6m cost).
Restructuring
The Group focused on taking actions to
conserve cash to manage through the
pandemic, including curtailing capital
expenditure, tightly managing working capital
and implementing further cost cutting actions.
At 31 December 2021, none of the Group’s
employees were on furlough (2020 – 7%).
The decisive actions taken on restructuring and
cost management over the last couple of years
has delivered the expected benefits. In addition,
the Group has continued to review inventory and
asset exposures on programmes that have been
reduced, cancelled or where the Group will no
longer participate. As part of the restructuring
focus, we have assessed critically any inventory
or asset exposures on these programmes and
written down the carrying values on excess
holdings and assets where there is no alternate
use. Where demand has picked up on previously
reduced or cancelled programmes, inventory
impairments have been reversed to the extent
that there are confirmed orders in place. Our
operating businesses have also worked hard to
maximise cash realised from disposal of assets
where there is no alternate use.
The restructuring, which involves business
closures and sale of associated assets,
headcount reductions and other benefits, has
resulted in net income of £4.4m (2020 – £39.0m
net cost). Of this, £4.2m income (2020 – £nil)
related to an aerospace manufacturing grant,
£1.0m net income for closures of Senior
Flexonics Upeca and Senior Aerospace Bosman
(2020 – £10.5m cost), £0.4m cost related to
headcount reduction (2020 – £13.5m cost) and
£1.0m cost related to consultancy and other
activities (2020 – £1.5m cost). For certain
specific programmes, and in conjunction with
the focus on restructuring, management has
also identified inventory impairment reversals of
£1.4m (2020 – £8.5m charge) where customer
demand has increased, and further impairment
provisions on property, plant and equipment in
2021 with a charge of £0.8m (2020 – £5.0m
charge) to cover the risk where there are no
alternative uses and in part due to customers
choosing to cancel and/or significantly reduce
future build rates.
Net cash outflow related to restructuring
activities was £0.9m (2020 – £15.2m), with
£50m of savings (2020 – £36m) delivered,
mainly related to lower headcount.
At 31 December 2021, a restructuring
provision of £1.3m (31 December 2020 –
£8.9m) was recognised and is expected to
be utilised in 2022.
Finance costs and investment income
Finance costs, net of investment income
decreased to £8.0m (2020 – £9.9m) and
comprise IFRS 16 interest charge on lease
liabilities of £2.6m (2020 – £3.0m), net
finance income on retirement benefits of £0.4m
(2020 – £0.9m) and net interest charge of £5.8m
(2020 – £7.8m). The decrease was mainly due
to lower borrowings including the repayment in
October 2020 of $20.0m (£14.6m) US Private
Placement Note carrying a high interest rate.
Corporate undertakings
Net income associated with corporate
undertakings was £21.2m in 2021, of which
£24.2m gain relates to the disposal of Senior
Aerospace Connecticut in April 2021, partly
offset by £3.0m bid defence and costs relating
to other corporate activities. In 2020, costs of
£4.6m were incurred relating to employee costs
and external professional fees for the potential
divestment of the Aerostructures business.
See Note 31 to the Financial Statements for
further details on the £24.2m gain on disposal.
Profit/loss before tax
Adjusted loss before tax was £1.9m (2020 –
£6.2m). Reported profit before tax was
£23.7m (2020 – £191.8m loss). The reconciling
items between adjusted loss and reported
profit/loss before tax are shown in Note 9 to
the Financial Statements.
Tax charge
The adjusted tax rate for the year was 136.8%
credit (2020 – 43.5% credit), being a tax credit
of £2.6m (2020 – £2.7m) on adjusted loss before
tax of £1.9m (2020 – £6.2m loss). The adjusted
tax rate benefits from prior year items as well
as enhanced deductions for R&D expenditure
in the US and capital expenditure in the UK.
The reported tax rate was 2.1% credit, being
a tax credit of £0.5m on reported profit before
tax of £23.7m. This included £2.1m net tax
charge against items excluded from adjusted
loss before tax, of which £2.9m related to the
corporate undertakings in the year and £0.6m
credit to the revaluation of UK deferred tax
assets at the substantially enacted 25%
corporation tax rate effective from 1 April 2023.
The 2020 reported tax rate was 17.4% credit,
being a tax credit of £33.3m on reported loss
before tax of £191.8m. This included the tax
credit of items excluded from adjusted profit
before tax of £30.6m, of which £21.7m related
to the reversal of deferred tax liabilities held
against goodwill impaired in 2020.
Cash tax paid was £5.3m (2020 – £3.5m) and is
stated net of refunds received of £0.9m (2020
– £0.3m) of tax paid in prior periods, including
refunds arising from the offset of tax losses
against taxable profits of prior periods. Tax
payments during the year are £2.3m higher than
they would otherwise have been as a result of
coronavirus relief measures in some countries
which allowed the deferral of tax bills normally
due in 2020 into 2021.
Tax policy
The Group acts with integrity in all tax matters,
in accordance with the Group’s ethics and
business conduct programme. It is the
Group’s obligation to pay the amount of tax
legally due and to observe all applicable rules
and regulations in the jurisdictions in which it
operates. While meeting this obligation, the
Group also has a responsibility to manage
and control the costs of our business, including
the taxes we pay for the benefit of all our
stakeholders. The Group seeks to achieve
this by conducting business affairs in a way
that is efficient from a tax perspective,
including maintaining appropriate levels of debt
in the countries we operate in and claiming
available tax reliefs and incentives. The Group
is committed to building and maintaining
constructive working relationships with the
tax authorities of the countries in which it
operates. Further details on our approach
to tax may be found on Senior’s website
at www.seniorplc.com.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
61
FINANCIAL REVIEW
CONTINUED
Earnings/loss per share
The weighted average number of shares, for the
purposes of calculating undiluted earnings/loss
per share, increased to 415.7 million (2020 –
414.9 million). The increase arose principally due
to exercising of share-based payment awards
during 2021. The adjusted earnings per share
was 0.17 pence (2020 – adjusted loss per share
of 0.84 pence). Basic earnings per share was
5.82 pence (2020 – basic loss per share of
38.20 pence). See Note 12 for details of the
basis of these calculations.
Return on capital employed (“ROCE”)
ROCE, a key performance indicator for the
Group as defined above, increased by 50 basis
points to 1.0% (2020 – 0.5%). The increase in
ROCE was mainly a result of the increase in
adjusted operating profit compared to prior year.
Research and design
The Group’s expenditure on research and design
was £19.2m during 2021 (2020 – £18.7m).
Expenditure was incurred mainly on funded
and unfunded work, which relates to designing
and engineering products in accordance
with individual customer specifications and
investigating specific manufacturing processes
for their production. The Group also incurs
costs on general manufacturing improvement
processes which are similarly expensed.
Unfunded costs in the year have been
expensed, consistent with the prior year, as
they did not meet the strict criteria required
for capitalisation.
Exchange rates
A proportion of the Group’s operating profit
in 2021 was generated outside the UK and
consequently, foreign exchange rates, principally
the US Dollar against Sterling, can affect the
Group’s results.
The 2021 average exchange rate for the US
Dollar applied in the translation of income
statement and cash flow items was $1.38
(2020 – $1.29). The exchange rate for the
US Dollar applied to the translation of Balance
Sheet items at 31 December 2021 was $1.35
(31 December 2020 – $1.37).
Using 2021 average exchange rates would
have decreased 2020 revenue by £36.4m
and decreased 2020 adjusted operating profit
by £0.8m. A 10 cents movement in the £:$
exchange rate is estimated to affect full-year
revenue on average by £28m, adjusted
operating profit by £1m and net debt by £7m.
Cash flow
The Group generated robust free cash flow of
£14.0m in 2021 (2020 – £46.5m) as set out in
the table below:
Operating profit/(loss)
Amortisation of intangible
assets from acquisitions
Goodwill impairment
and write-off
Net restructuring
(income)/costs
Adjusted operating profit
Depreciation (including
amortisation of software)
Working capital and
provisions movement,
net of restructuring items
Pension payments above
service cost
Other items(1)
Interest paid, net
Income tax paid, net
Capital expenditure
Sale of property, plant
and equipment
Free cash flow
Corporate undertakings
Net restructuring
cash paid
US Class action lawsuits
Net cash flow
Effect of foreign exchange
rate changes
IFRS 16 non-cash
additions and
modifications after
disposals
Change in net debt
Opening net debt
Closing net debt
2021
£m
10.5
2020
£m
(177.3)
–
–
(4.4)
6.1
7.7
134.3
39.0
3.7
47.8
53.9
(2.6)
32.3
(5.1)
2.2
(8.0)
(5.3)
(21.3)
0.2
14.0
46.9
(0.9)
(2.3)
57.7
(5.0)
2.0
(10.6)
(3.5)
(26.8)
0.5
46.5
(4.2)
(15.2)
(3.9)
23.2
0.7
2.4
(5.6)
52.8
(205.9)
(153.1)
(1.9)
23.7
(229.6)
(205.9)
(1) Other items comprises £3.5m share-based payment
charges (2020 – £3.0m), £(0.2m) profit on share of joint
venture (2020 – £(0.2m)), £(1.1m) working capital and
provision currency movements (2020 – £(0.7m) before
£0.5m foreign exchange loss recycled to the Income
Statement on restructuring activities) and £nil profit on
sale of fixed assets (2020 – £(0.1m) profit).
Capital expenditure
Gross capital expenditure of £21.3m
(2020 – £26.8m) was 0.6 times depreciation
excluding the impact of IFRS 16 (2020 – 0.6
times). The disposal of property, plant and
equipment raised £0.2m (2020 – £0.5m).
As previously advised, the Group’s operating
businesses are capitalised and prepared for
growth. Therefore, we can expect future capital
investment to be at more normal levels: 2022
capital investment is expected to be slightly
below 2022 depreciation (excluding the impact
of IFRS 16). We are prioritising new investment
on health and safety related items; important
replacement equipment for current production;
and growth projects where contracts have
been secured.
Working capital
Working capital decreased by £3.0m in 2021
to £103.0m (2020 – £106.0m), reflecting our
relentless and effective focus on working capital
management. With demand recovery underway
in our key end markets, and some supply chain
lead times increasing, we may see an increase
in working capital over the coming months.
We will continue to manage this diligently.
The Group participates in some non-recourse
reverse factoring schemes which are arranged
by our customers as a way of reducing
credit risk. The trade receivables reverse
factored under such non-recourse schemes at
31 December 2021 were £16.8m (31 December
2020 – £17.6m). The net impact of reverse
factoring on 2021 was a cash outflow in working
capital of £0.9m (2020 – £13.3m outflow) and
the discount interest presented within other
finance costs is a charge of £0.2m in 2021
(2020 – £0.2m). These arrangements follow
standard market terms and conditions and,
as noted above, are 100% non-recourse to
the Group, thereby transfer all credit risk to
the financial institutions who provide the
factoring schemes.
Dividend
The Group had a long and stable track
record of dividend growth prior to 2020. While
Group performance in 2021 has improved
compared to 2020, it was still impacted by the
pandemic, and as such, the Board believes it is
not appropriate to pay a dividend for the year.
Therefore, no cash outflow was incurred during
2021 in respect of dividends (2020 – £nil).
The Board recognises the importance of the
dividend for our shareholders and is optimistic
that the recovery currently underway in our core
end markets will continue. The Board therefore
expects to resume dividend payments in 2022.
We will continue to follow a progressive
dividend policy reflecting earnings per share,
free cash flow generation, market conditions
and dividend cover over the medium term.
62
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
STRATEGIC REPORT Net debt/EBITDA
Funding headroom (£m)
20
21
2.8x
1.9x
20
21
157
208
Goodwill
The reduction in goodwill from £165.0m at
31 December 2020 to £150.2m at 31 December
2021 reflects the disposal of Senior Aerospace
Connecticut in April 2021 (£15.1m reduction),
partly offset by foreign exchange differences
(£0.3m increase).
Retirement benefit schemes
The retirement benefit surplus in respect of
the Group’s UK defined benefit pension plan
(“the UK Plan”) increased by £25.7m to £72.2m
(31 December 2020 – £46.5m) due to £19.7m
net actuarial gains, £5.4m cash contributions
by the Group, in excess of running costs, and
£0.6m net interest income. Retirement benefit
deficits in respect of the US and other territories
increased by £0.1m to £11.0m (31 December
2020 – £10.9m).
The latest triennial actuarial valuation of the
UK Plan as at 5 April 2019 showed a deficit of
£10.2m (5 April 2016 – deficit of £37.4m). As a
result, and effective from April 2019, the Group’s
deficit reduction cash contributions to the UK
Plan have reduced from an annual amount
of £8.1m to an annual amount of £5.5m.
The Group continues to contribute £0.5m
per annum towards plan administration costs.
These contributions are payable over the
three-year period to March 2022 and are subject
to review and amendment as appropriate at the
next funding valuation in 2022.
Net debt
Net debt which includes IFRS 16 lease
liabilities decreased by £52.8m to £153.1m
at 31 December 2021 (31 December 2020 –
£205.9m). As noted in the cash flow above,
the Group generated net cash flow of £57.7m
(as defined in Note 32(c) of the Financial
Statements) and benefited from £0.7m
favourable foreign currency movements,
partially offset by £5.6m non-cash
changes in lease liabilities due to additions
and modifications.
Net debt excluding IFRS 16 lease liabilities
of £73.2m (31 December 2020 – £76.5m)
decreased by £49.5m to £79.9m at
31 December 2021 (31 December 2020 –
£129.4m).
The Group has two existing covenants
(“Existing Covenants”) for committed borrowing
facilities, which are tested at June and
December: the Group’s net debt to EBITDA
(defined in the Notes to the Financial Headlines
on page 1) must not exceed 3.0x and interest
cover, the ratio of EBITDA to interest must be
higher than 3.5x. The Group’s lenders, both
banks and US private placement investors,
have been supportive and we agreed covenant
relaxations (“New Covenants”) in relation to the
June 2020, December 2020, June 2021 and
December 2021 testing periods and agreed an
additional September 2021 testing period to
provide financial flexibility for the Group through
this unprecedented period.
For the testing period ended 31 December
2021, the New Covenants required the Group’s
net debt to EBITDA must not exceed 4.5x,
interest cover must be higher than 3.5x and
liquidity headroom must be higher than £40.0m.
At 31 December 2021, the Group’s net debt to
EBITDA was 1.9x and interest cover was 7.3x,
both comfortably within the Existing (and New)
Covenants limits. The Group’s liquidity
headroom at £208.0m was also comfortably
within covenant limits.
UK withdrawal from the European Union
The Group’s Brexit Committee undertook
detailed reviews and continues to assess
the impact of the UK’s decision to leave the
European Union including from a regulatory,
supply chain, people and financial perspective.
Appropriate steps were taken to prepare for the
transition, particularly to minimise any potential
operational disruption, with limited impact on
the Group’s performance in 2021. While we do
not anticipate a significant direct impact from
Brexit on the Group’s activities, we remain
alert to any long-term impact of Brexit on
macroeconomic conditions. Our assessment
remains that any direct or indirect impact
from Brexit will be limited given the Group’s
global positioning.
Funding and Liquidity
As at 31 December 2021, the Group’s gross
borrowings excluding leases and transaction
costs directly attributable to borrowings were
£132.0m (31 December 2020 – £154.4m),
with 62% of the Group’s gross borrowings
denominated in US Dollars (31 December 2020
– 62%). Cash and bank balances were £51.1m
(31 December 2020 – £23.6m).
The maturity of these borrowings, together with
the maturity of the Group’s committed facilities,
can be analysed as follows:
Within one year
In the second year
In years three to five
After five years
Gross
borrowings(2)
£m
14.8
–
71.5
45.7
132.0
Committed
facilities
£m
14.8
35.9
191.5
45.7
287.9
(2) Gross borrowings include other loans and committed
facilities, but exclude leases of £73.2m and transaction
costs directly attributable to borrowings of £(1.0m).
At the year-end, the Group had committed
facilities of £287.9m comprising private
placement debt of £132.0m and revolving
credit facilities of £155.9m. The Group is in
a strong funding position, with headroom
at 31 December 2021 of £208.0m in cash
and undrawn facilities.
In April 2021, the Group refinanced its US
revolving credit facility of $50.0m (£37.0m at
year end exchange rate) and extended the
maturity to June 2023.
The weighted average maturity of the Group’s
committed facilities at 31 December 2021 was
3.0 years.
Bindi Foyle
Group Finance Director
The Group has £nil (2020 – £0.4m) of
uncommitted borrowings which are repayable
on demand.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
63
VIABILITY STATEMENT
Following a robust assessment, the Directors have concluded that
the Group and Parent Company have sufficient funds to operate for
the foreseeable future (evaluated to 31 December 2024), even in a
severe but plausible downside scenario.
In accordance with provisions 30 and 31 of
the 2018 UK Corporate Governance Code,
published by the Financial Reporting Council
in 2018, the Directors have assessed the
prospects of the Group over the three-year
period to 31 December 2024.
While the impact of the pandemic and industry
wide supply chain constraints are still with us,
we continue to manage these diligently.
Notwithstanding near-term uncertainties in the
global economy, Senior is well placed to benefit
from the recovery underway in our end markets.
However, the Board has maintained a higher
level of caution than years prior to 2020, in
evaluating the severe but plausible downsides.
The Board has considered a three-year period,
as this reflects the normal mid-term planning
cycle of its business operations while
adequately covering customer lead times for
both new and expansion investment. In addition,
this period provides sufficient clarity to consider
the business prospects and potential recovery
from the pandemic under a base case, while
also assessing continued impacts under a
severe but plausible downside scenario.
The base case projections of the viability
assessment are based on the Group’s Budget
for 2022 and the Group’s Strategy for 2023 and
2024. Global air traffic recovery in 2021 showed
ongoing progress as the COVID-19 vaccine
rollout & booster gathered pace and travel
restrictions eased globally. IATA reported that
overall travel demand in 2021 strengthened and
its current view is that world passenger flows
will return to 2019 levels by the end of 2023.
IATA expects domestic traffic to reach 2019
levels by 2022 and international traffic to return
to 2019 levels by 2025. As demand recovers,
production of new aircraft will be supported by
the replacement cycle driven by the accelerated
retirement of older, less efficient, aircraft
during the pandemic. Beyond this, the drivers
supporting air traffic growth over the long term
of c. 4% per annum remain in place. The lower
operating cost and better sustainability of new
aircraft, on which Senior has significant content,
will continue to be a necessity for the airline
industry. In the Group’s other key markets,
defence is anticipated to remain stable, the
Flexonics land vehicle markets are expected to
continue to grow through the medium term and
in the power and energy markets, recovery in
the oil and gas sector is now underway.
In determining a severe but plausible downside
scenario, the base case projections are flexed to
reflect the probability weighted and cumulative
estimated effects of the Group’s principal risks
and uncertainties, as disclosed on pages 50 to
55, including but not limited to the risks related
to the pandemic and the impact on end market
demand, as well as inflation and programme
and supplier management.
To address the impacts under the severe but
plausible downside, the Board has considered
the mitigating actions within the Group’s direct
control. These include a continued focus on
conserving cash through vigilant management
of capital expenditure and working capital
together with further restructuring actions
and limiting non-critical discretionary spend.
Committed facilities and debt covenants
At 31 December 2021, the Group held
committed borrowing facilities of £287.9m with
liquidity headroom of £208.0m. The weighted
average maturity of the Group’s committed
facilities at the end of December 2021 was
3.0 years. Net debt (defined in Note 32(c)
was £153.1m, including £73.2m of capitalised
leases which do not form part of the definition
of debt under the committed facilities and do
not impact the Group’s lending covenants.
The Group has two Existing Covenants for
committed borrowing facilities, which are
tested at June and December: the Group’s net
debt to EBITDA (defined in the Notes to the
Financial Headlines on page 1) and interest cover,
the ratio of EBITDA to interest. The Group’s
lenders, both banks and US private placement
investors, have been supportive and agreed
New Covenants in relation to the December
2020, June 2021 and December 2021 testing
periods, and an additional September 2021
testing period to provide financial flexibility for
the Group through this unprecedented period.
However, this flexibility was not utilised as
the Group’s performance in 2020 and 2021
was within the Existing Covenants.
64
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
Board’s conclusion
Modelling the base case and severe but
plausible downside scenarios and
mitigations indicate that the Group is in
compliance with all debt covenants at all
measurement dates out to 31 December 2024.
The scenarios also highlight sufficient liquidity
headroom throughout the period in light of
the committed facilities available. Accordingly,
following a robust assessment the Directors
have concluded that the Group and Parent
Company have sufficient funds to operate for
the foreseeable future, even in a severe but
plausible downside scenario. For the going
concern assessment, the foreseeable future
covers a minimum period of 12 months from the
date of approval of these Financial Statements,
and with the viability period evaluated out to
31 December 2024.
Going concern
As a consequence of the work undertaken
to support the viability statement above, the
Directors have, at the time of approving these
Financial Statements, a reasonable expectation
that the Group and Parent Company have
adequate resources to continue in operational
existence for the foreseeable future, being a
period of at least 12 months from the date
of approval of these Financial Statements.
Accordingly, they continue to adopt the going
concern basis of accounting in preparing these
Financial Statements, having undertaken a
rigorous assessment of the financial forecasts.
Approval
The Strategic Report from pages 1 to 64
was approved by the Board of Directors on 25
February 2022 and signed on its behalf by
David Squires
Group Chief Executive Officer
STRATEGIC REPORT CHAIR’S GOVERNANCE LETTER
A Governance Framework that has been
tested, challenged and has stood firm
and robust over an extended period of
external events and circumstances.”
Ian King
Chair
CONTENTS
Board of Directors
Executive Committee and HSE
Committee
Report of the Directors
Directors’ duties
Nominations Committee Report
Audit Committee Report
Remuneration
68
72
73
75
76
80
87
2021 Remuneration Report at a Glance 90
Remuneration Report: Policy
Remuneration Report: Annual Report
on Remuneration
Independent Auditor’s Report to the
Members of Senior plc
92
98
109
Statement of compliance with
the Corporate Governance Code
The Company is subject to the UK
Corporate Governance Code 2018
(the Code), which is published by the
Financial Reporting Council and
available on their website: www.frc.org.
uk/directors/corporate-governance-and-
stewardship/uk-corporate-governance-
code.
We have been fully compliant with
the Code throughout 2021, other than
the executive Directors’ pension
contributions, which will be aligned
with the rates available to the majority
of the UK workforce by the end of 2022.
Further details of how the Company
applied the Principles of the Code can
be found on pages 75 to 107.
Dear Shareholders,
In another year of external events that
challenged the Company the Governance
Framework proved to be invaluable and robust.
The approach by LSF XI Investments, LLC,
a company advised by Lone Star Global
Acquisitions, Limited, came at a time when the
Group continued to face challenging trading
conditions as a result of the continued COVID-19
pandemic. As we emerged from the difficult
conditions of last year, I look forward to leading
the Board in the next phase of the Company’s
development and growth and I am confident
we have the right Board of Directors in place,
working with the Executive Leadership Team,
to implement the Company’s strategy. The
non-executive Directors have brought strong,
broad, professional and complementary qualities
to the Board, which proved invaluable during
2021. Despite the challenges, the Board
maintained its focus and progress on
sustainability, both in terms of environmental,
social and governance (“ESG”) across the
operations, as well as those relevant to the
Group’s products, technologies and capabilities.
Corporate governance has always been given
prominence across the Senior plc Group; the
Board sets the tone and takes the lead on
governance matters. The Governance section
of this Annual Report is intended to provide
Senior’s shareholders with a clear and
meaningful explanation of what governance
means to the Board and how this guides its
decision-making processes.
The Board remains firmly committed to ensuring
the long-term sustainable growth of the Group,
generating value for shareholders, whilst
considering the needs of all its stakeholders.
I have summarised below the Company’s
approach to key governance matters.
Board governance
Leadership
The Board is led by me, as the non-executive
Chair, together with two executive Directors
and six independent non-executive Directors,
following Barbara Jeremiah’s appointment on
1 January 2022. All Directors were selected for
appointment because of their wide industrial
and commercial experience; we have an
excellent, well-balanced Board. In addition,
the Group’s Executive Committee, chaired by
the Group Chief Executive Officer, comprises
the two executive Directors and other key
executives. Details of the members of the
Board and of the Executive Committee can
be found on pages 68 to 72. My role as
Chairman includes:
(a) setting the Board’s agenda, style and tone
of Board discussions and ensuring that
adequate time is available for discussion of
all agenda items, in particular strategic issues;
(b) supporting the Group Chief Executive
Officer in the development of strategy and,
more broadly, to offer guidance to the Group
Chief Executive Officer;
(c) promoting a culture of openness and debate
by facilitating the effective contribution
of non-executive Directors and ensuring
constructive relations between non-
executive Directors and executive
management;
(d) ensuring that the Directors receive accurate,
timely and clear information;
(e) ensuring, in conjunction with the Group
Chief Executive Officer, effective
communication with shareholders; and
(f) ensuring that the performance of the Board,
its main committees and individual Directors
are formally evaluated on an annual basis.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
65
CHAIR’S GOVERNANCE LETTER CONTINUED
Board and Committee membership and attendance
As the pace of decision-making increased in 2021 as a result of the pandemic, the Board increased its frequency of meetings. The membership and
attendance record of the full Board Meetings and its full Committee Meetings during 2021 are shown in the table below:
Chair
Total number of meetings
Ian King
Celia Baxter
Susan Brennan
Bindi Foyle
Giles Kerr
Rajiv Sharma
David Squires
Mary Waldner(1)
Main Board
Ian King
Audit
Committee
Giles Kerr
Nominations
Committee
Ian King
Remuneration
Committee
Celia Baxter
20/20
20/20
19/20
20/20
18/20
19/20
20/20
3/3
–
5/5
4/5
–
5/5
4/5
–
–
6/6
6/6
6/6
–
6/6
6/6
–
1/1
7/7
7/7
6/7
–
7/7
6/7
–
2/2
(1) Mary Waldner was appointed to the Board on 1 December 2021.
Barbara Jeremiah was appointed to the Board on 1 January 2022 and so has not been included in the table above.
The non-executive Directors have an
important role in reviewing and challenging
executive management’s decisions and actions.
The events of 2021, including the continuing
COVID-19 pandemic and the possible
takeover bid by Lone Star, have highlighted the
importance of having an effectively functioning,
flexible and dedicated Board, with the Directors
working together to ensure the Group was able
to contend with the difficult and complex issues
that arose.
The Directors are confident that an effective
Board is in place, with clear division of
responsibilities between the running of the
Board and the running of the Group’s
businesses. In 2021, a detailed Board evaluation
review was undertaken with the assistance of
EquityCulture Limited which confirmed that the
Board was performing well. The review found
that the Board had operated effectively and
robustly throughout the particularly difficult year.
A summary of the 2021 report on the Board
evaluation findings and a list of recommended
actions are provided on page 77.
I was independent upon appointment as Chair
of the Company in 2018. The Board considers
all non-executive Directors of the Company
continue to be independent, having taken into
account a list of relationships and circumstances
that may appear relevant in determining
independence. As Chair, I encourage open and
honest discussions between the Directors, both
within and outside Board meetings, and ensure
no Director or group of Directors exerts pressure
or dominates the Board’s decision-making.
Engagement with stakeholders
Shareholders
Each year, the Group Chief Executive Officer,
Group Finance Director and Director of Investor
Relations & Corporate Communications
undertake a series of meetings with the
Company’s major shareholders, following the
announcement of the full-year and interim
results, to discuss both the Board’s strategic
objectives and the detailed performance of the
business. Notwithstanding the restrictions
imposed as a result of the Coronavirus
pandemic, regular communication continued.
As the Company’s non-executive Chair, I also
attended the full-year 2020 and 2021 interim
results announcements made to analysts in
March and August 2021. I also met with the
Company’s major shareholders on a regular
basis, with a cycle that is complementary
to the executive Directors. In addition,
I led the shareholder consultation with
respect to the Lone Star bid.
The frequency of meetings with major
shareholders increased in 2021, to address
the challenges faced by the Company as a
result of the possible takeover bid by Lone Star
and the continued pandemic; these exchanges
highlighted the value of establishing and
maintaining close relationships.
We also further consulted on the 2021
Directors’ Remuneration Policy. Celia Baxter,
the Senior Independent non-executive Director,
was also available to attend meetings with
major shareholders upon request, so providing
an alternative channel of communication
between the Company and its shareholders.
The Company typically makes constructive use
of the Annual General Meetings (“AGM”) to
communicate with its private shareholders. In
April 2021, this process had to again be limited,
because of the UK Government’s restrictions
due to the pandemic; however, we chose to
offer private shareholders live audio access
to the proceedings of the AGM and the
opportunity to submit questions to the Directors
and listen to their responses. In April 2022,
regulations permitting, we will be offering a
hybrid format for the AGM; this will involve
shareholders being able to physically attend
the Meeting to be held in London or gain audio
access to listen to the proceedings and submit
questions to the Board by email. A presentation
on the Company’s annual performance to be
made to shareholders by the Group Chief
Executive Officer will be made available to all
shareholders choosing to attend either in person
or virtually; a copy of this presentation will also
be uploaded to the Company’s website. We will
continue to monitor the AGM structure as and
when circumstances change.
At our AGMs, we value the engagement with
shareholders and the opportunity for the Group
Chief Executive Officer to present on the
Group’s business.
Employees
Celia Baxter is the Director designated by the
Board to engage with the Group’s workforce
and listen to any employee concerns. During the
year, she participated in 15 face-to-face Focus
Group meetings at four of the UK operating
businessses with the Group HR Director, Jane
Johnston. Feedback from the meetings was
provided to local Management, the Executive
Leadership Team and to the Company’s Board
of Directors, who were given the opportunity
to ask questions on the findings and make
suggestions for improvement in 2022.
Further details on Employee Engagement
can be found on page 41.
66
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
GOVERNANCE The Board was flexible in its approach, embraced Video
Conferencing technology and met 20 times over the year.
The commitment of all members has been exemplary.”
Ian King
Chair
Customers
Due to the nature of the business, the Group
has well-established relationships with all
its key customers. These relationships are
maintained on an ongoing basis and managed
in a transparent and constructive manner; any
customer concerns are addressed in a timely
manner, to ensure continuity of supply and
customer satisfaction. In 2021, it continued
to be important for the Group’s operating
businesses to maintain regular contact with
their customers, as the Group’s supply chain
faced the difficult conditions created by the
COVID-19 pandemic.
The Group has dedicated account managers
to deal directly with key customers on existing
and new customer agreements. Relationships
with potential and new customers are also
established on an open and professional basis,
and in compliance with the Group’s Corporate
Framework and Code of Conduct.
Further details on Customer Engagement
can be found on page 41.
Suppliers
Maintaining a good relationship with Senior’s
supply chain is fundamental to providing
customers with products in a timely manner and
to a high standard. In 2021, it was particularly
important for the Group to maintain regular
contact with its suppliers and work together
constructively to ensure the Group’s supply
chain was able to maintain continuity of supply
during the challenging business environment
created by the pandemic.
Agreements with major suppliers have, in many
cases, been arranged to support long-term
agreements with the Group’s key customers.
Due to the nature of the materials utilised,
supplies may involve long lead times, and so
communication and managing good relations
with suppliers is paramount to the Group’s
operating businesses. In 2021, we engaged
with the top 80% of our suppliers by value,
to encourage and help them to analyse their
sustainability performance and goals in relation
to greenhouse gas reduction- this was
recognised by CDP, who gave us a Supplier
Engagement Leadership A rating.
Further details on Supplier Engagement
can be found on page 42.
2021 has been an extremely challenging year
for the Board, the Company, its employees and
shareholders. We have shown resilience, made
difficult decisions, been agile in our responses
and not compromised the Group’s standards
and values. The Board firmly believes it is strong
and well-positioned to take the Group into
the next phase of growth. Our Governance
Framework has been strongly tested, stood firm
and is effective for today and for the next phase
of growth. I convey the Board’s thanks for
your support.
Ian King
Chair
25 February 2022
Community and the environment
Many of the Group’s operations are major
employers within their local communities
and nurture good relationships with their
stakeholders, finding ways to contribute to local
society, in addition to providing employment
opportunities. Despite the pandemic, where
possible, community engagement programmes
were maintained. The Group’s commitment to,
and focus on, the environment continued
following our greenhouse gas emission
reduction targets being independently verified
and approved by the Science Based Targets
initiative (“SBTi”) in 2021. In December 2021,
we were delighted to have again achieved a
Leadership rating of A- from the globally
recognised Carbon Disclosure Project (“CDP”).
All of the Group’s operating businesses take
stakeholder engagement very seriously,
ensuring they adhere to the highest of standards
for the protection of health, safety and the
environment; in many cases, they have
established or maintained close relationships
with local schools and colleges to offer training
or apprenticeship programmes.
Further details on Community Engagement and the
environment can be found pages 14 and 42.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
67
BOARD OF DIRECTORS
The Board is responsible for
Group decisions affecting
governance, strategy and the
approval of annual operating
budgets and Financial
Statements.
Tenure – Board
Over six years
Over three and
up to six years
Up to three years
4
3
2
Diversity – Board(1)
Female
Male
55%
45%
(1) Following Barbara Jeremiah’s appointment
to the Board on 1 January 2022
Ian King
Company Chair and Chair of the Nominations
Committee
Responsibilities
Leadership of the Board, setting its agenda
and ensuring its effectiveness.
Qualifications
Fellow of the Chartered Institute of
Management Accountants.
Appointment to the Board
Ian King joined the Board on 13 November 2017
as a non-executive Director and became
Chairman in April 2018.
Committee membership
Nominations (Chair) and Remuneration.
Skills and experience
For more than 40 years Ian has held many
senior management and directorship roles,
including finance, executive management,
customer support and strategic planning.
Career experience
Ian joined Marconi in 1976 and held a number
of roles with them. He was Chief Executive
of Alenia Marconi when Marconi and British
Aerospace merged in 1999 to form BAE
Systems plc. He then became Group Strategy
and Planning Director of BAE Systems; Ian was
its Chief Executive from 2008 until his retirement
in June 2017. He was also the senior independent
director of Rotork plc until June 2014.
Current directorships/business interests
Ian is the Senior Independent Director of
Schroders plc, having been appointed to its
Board on 1 January 2017, the lead non-executive
Director of the Department for Transport, a
non-executive Director of High Speed Two
(HS2) Limited, and is a senior advisor to the
Board of Gleacher Shacklock LLP.
Independence
Ian met the UK Corporate Governance Code’s
independence criteria on his appointment
as Chairman.
Specific contribution to the Company’s
long-term success
Ian leads the Board in defining the strategy of
the Group and driving the Company’s vision to
produce sustainable growth in operating profit,
cash flow and shareholder value. Ian has
relevant direct experience in Aerospace,
a key element of Senior’s strategy.
Celia Baxter
Senior Independent Non-Executive Director,
Chair of the Remuneration Committee and
Director designated to engage with the Group’s
employees
Responsibilities
To support the Chairman and to act as an
intermediary for other non-executive Directors,
if necessary. Celia chairs the Remuneration
Committee and is also the Director designated
to engage with the Group’s employees.
Qualifications
BSc – Botany/Plant Biology and PhD and a
Member of the Chartered Institute of Personnel
and Development.
Appointment to the Board
Celia Baxter joined the Board on 2 September
2013, became Chair of the Remuneration
Committee in December 2013 and the Senior
Independent non-executive Director in April 2019.
Committee membership
Remuneration (Chair), Audit and Nominations.
Skills and experience
Celia is an experienced non-executive Director,
Remuneration Committee and Pension Trustee
Company Chair.
Career experience
Celia’s early HR career was with Ford Motor
Company and KPMG. She has held executive
HR positions with Hays plc, Enterprise Oil Plc
and Tate & Lyle Plc, and most recently was
Director of Group HR and responsible for all
areas of sustainability for Bunzl plc. Celia was
a non-executive director of RHI Magnesita until
June 2021.
Current directorships/business interests
Celia is a non-executive Director of
DS Smith plc.
Specific contribution to the Company’s
long-term success
Celia brings extensive experience of working
in international, decentralised businesses
and managing HR departments to the Board.
She holds a key role in engaging with the
Group’s stakeholders, particularly its employees.
She advises and guides on succession
planning matters. Celia demonstrates valuable
knowledge of sustainability policies and practices.
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SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
GOVERNANCE Susan Brennan
Independent Non-Executive Director
Bindi Foyle
Group Finance Director
Responsibilities
To challenge the executive Directors and
monitor the delivery of the strategy within the
risk and control framework set by the Board.
Qualifications
BSc in Microbiology and MBA.
Appointment to the Board
Susan Brennan joined the Board in January 2016.
Committee membership
Audit, Nominations and Remuneration.
Skills and experience
Susan brings more than 25 years of
manufacturing experience, including automotive
vehicle, powertrain and components assembly.
Susan has dedicated her career to improving
American manufacturing and assuring that the
United States maintains a vital manufacturing
footprint. In her time as a manufacturing
practitioner, she has always been a strong
proponent of sustainability, starting in her first
role as the Environmental and Coating Manager
with Douglas and Lomason, leading the plant to
the State of Iowa’s first ever Waste Minimization
award and, more recently, launching the
all-electric Nissan Leaf in Smyrna, USA.
Career experience
Susan served as VP of Manufacturing at Nissan
North America, Inc. and as Director of global
manufacturing at Ford, where she led a global
business office for Ford’s assembly, powertrain
and stamping plants. Until 5 August 2021, Susan
was the Executive Vice-President and Chief
Operations Officer of Bloom Energy Corporation.
Current directorships/business interests
In August 2021, Susan was appointed the
President and Chief Executive Officer of Romeo
Power, Inc., an energy technology company
delivering large-scale electrification solutions
for complex commercial vehicle applications
based in Los Angeles, California.
Specific contribution to the Company’s
long-term success
Susan brings valuable manufacturing experience
to the Board, especially in areas of key
technological advances. Her operational and
executive experience, particularly in automotive
and component assembly, means she is well
placed to understand issues at both operational
and strategic levels.
Responsibilities
To manage the Group’s financial affairs and to
contribute to the management of the Group’s
business and to the implementation of the
strategy and policies approved by the Board.
Qualifications
BSc (Hons) in Economics & Accounting and
a Chartered Accountant.
Appointment to the Board
Bindi Foyle joined the Board as an executive
Director on 3 May 2017 and became Group
Finance Director on 1 July 2017.
Committee membership
Bindi sits on the Group Executive Committee
and the Treasury Committee, which is not
formally appointed as a Committee of the Board.
Skills and experience
Bindi joined Senior as Group Financial Controller
in January 2006, a role she held until July 2014
when she became responsible for the Group’s
Investor Relations activities. Prior to her
appointment as an executive Director,
Bindi was Director of Investor Relations and
Corporate Communications for the Group.
Career experience
Prior to joining Senior, Bindi held senior finance
roles at Amersham plc and GE, having
previously worked with BDO Stoy Hayward.
Current directorships/business interests
Bindi is a non-executive director of Avon
Protection plc; in January 2021 she became
the Chair of its Audit Committee.
Specific contribution to the Company’s
long-term success
Bindi’s experience of financial control and
investor relations and communications means
that she is ideally placed to implement the
strategy and policies approved by the Board.
Since joining the Group in 2006, she has gained
extensive knowledge of the running of all the
Group’s operations and is instrumental in
managing the Group’s finances and assisting
the Group Chief Executive Officer in the
management of the Executive team.
Giles Kerr
Independent Non-Executive Director and Chair
of the Audit Committee
Responsibilities
To challenge the executive Directors and
monitor the delivery of the strategy within the
risk and control framework set by the Board. To
Chair the Audit Committee and focus its agenda
on its key matters: quality, financial accounting,
corporate reporting and effective internal controls.
Qualifications
BA (Hons) in Economics and a Chartered
Accountant.
Appointment to the Board
Giles Kerr joined the Board on 2 September
2013 and became Chair of the Audit Committee
in April 2014.
Committee membership
Audit (Chair), Nominations and Remuneration.
Skills and experience
Giles has over 35 years’ experience in finance
across a broad range of industrial sectors.
During his tenure as Director of Finance at
Oxford University, he established a successful
investment office and he gained considerable
experience of establishing and growing
technology-based companies.
Career experience
Giles is a former Director of Finance of Oxford
University and non-executive director of BTG Plc
and Victrex plc, Adaptimmune Therapeutics plc
and Arix Bioscience plc. Giles held a number of
positions with Amersham plc, including Group
Finance Director. He was formerly a Partner
with Arthur Andersen & Co.
Current directorships/business interests
Giles was appointed a non-executive director
and Chairman of PayPoint plc in November 2015.
He is also a non-executive director of Abcam plc.
Specific contribution to the Company’s
long-term success
Giles’ extensive experience as a chairman and
senior independent director, and as the chair
of several UK and US listed company audit
committees, enables him to make a strong
contribution to the Board and he has ensured
strong financial governance of the Group.
It is intended Giles will step down from the
Board following a suitable transition period
with Mary Waldner and the rotation of the lead
audit partner.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
69
BOARD OF DIRECTORS CONTINUED
Rajiv Sharma
Independent Non-Executive Director
David Squires
Group Chief Executive Officer
Mary Waldner
Independent Non-Executive Director
Responsibilities
To challenge the executive Directors and
monitor the delivery of the strategy within the
risk and control framework set by the Board.
Responsibilities
To manage the Group’s business and to
implement the strategy and policies approved
by the Board.
Responsibilities
To challenge the executive Directors and
monitor the delivery of the strategy within the
risk and control framework set by the Board.
Qualifications
BTech in Mechanical Engineering and MBA,
Marketing & Strategy.
Appointment to the Board
Rajiv Sharma was appointed to the Board on
1 January 2019.
Committee membership
Audit, Nominations and Remuneration.
Skills and experience
Rajiv has nearly 30 years’ experience which
includes commercial, operations, M&A,
strategy, digital and general management.
Rajiv joined Coats Group plc in November 2010
as Global CEO Industrial and was responsible
for developing and executing a growth strategy.
He has lived and worked in the US, Europe and
Asia and has multi-industry global experience.
He has managed complex businesses with
blue-chip companies. The majority of his career
has been dedicated to growing or turning around
businesses and he has been on the board of
joint ventures.
Career experience
During his career, Rajiv has held senior roles
in various companies including Honeywell,
GE and Shell.
Current directorships/business interests
Rajiv has been the Group Chief Executive
of Coats Group plc since January 2017,
having served as an executive director since
March 2015.
Specific contribution to the Company’s
long-term success
Rajiv has had a long career running and growing
multinational companies across the world,
particularly in South East Asia. His background
in mechanical engineering means that he brings
operational and technical understanding to
the Board’s discussions. His experience of
developing and executing growth strategy make
his contribution to delivering the Company’s
long-term success an important one.
Qualifications
BA in Business Management Studies, a Fellow
of the Chartered Institute of Purchasing and
Supply and Fellow of the Royal Aeronautical
Society.
Appointment to the Board
David Squires was appointed to the Board on
1 May 2015 and became Group Chief Executive
Officer on 1 June 2015.
Committee membership
David chairs the Group’s Executive Committee.
He is also the Chair of the Health, Safety &
Environment Committee, which meets formally
three times a year to formulate the Group’s HSE
strategy and objectives for approval by the Board.
Skills and experience
A graduate in business management, member
of the Chartered Institute of Purchasing and
Supply and Fellow of the Royal Aeronautical
Society. David has held senior posts in
operations and procurement, business
development, programme management and
general management.
Career experience
David started his career in the oil industry
working for Shell; however, most of his working
life has been spent in the aerospace industry,
initially with Hughes Aircraft Company (now
Raytheon), then GEC-Marconi/BAE Systems
and Eaton Corporation. Prior to joining Senior plc
in May 2015, David was Chief Operating Officer
of Cobham plc.
Current directorships/business interests
David holds no other directorships.
Specific contribution to the Company’s
long-term success
David has a long- established career in
manufacturing, for the most part having
specialised in the aerospace sector. He brings
extensive knowledge of the aerospace industry
and understanding of procurement and business
development to the Board. David has been
the guiding force in driving the Group’s vision
and operating in a safe and ethical manner.
Qualifications
MA (Hons) in Physics and a Fellow of the
Chartered Institute of Management Accountants.
Appointment to the Board
Mary Waldner joined the Board on 1 December
2021. It is intended Mary will became Chair
of the Audit Committee upon Giles Kerr’s
retirement from the Board, following a suitable
transition period.
Committee membership
Audit, Nominations and Remuneration.
Skills and experience
Mary held a number of senior roles within the
aerospace and automotive sectors at British
Airways, General Motors and Vauxhall Motors.
At Ultra Electronics, Mary gained experience
of working within the defence, security and
energy markets.
Career experience
She was previously the Group Finance Director
of Ultra Electronics Holdings plc, the Director of
Group Finance at QinetiQ Group plc and Group
Financial Controller of 3i Group plc.
Current directorships/business interests
Mary is Chief Financial Officer of Lloyd’s
Register, the global professional services
company specialising in engineering and
technology for the maritime industry. She is also
a non-executive Director and Chair of the Audit
and Risk Committee of Oxford Instruments plc,
a provider of high technology products and
services to the world’s leading industrial
manufacturers and scientific research institutes.
Specific contribution to the Company’s
long-term success
Mary’s background and experience in finance
and in the engineering sector will complement
the current Board membership and prove
invaluable in Senior’s continued development.
70
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
GOVERNANCE Barbara Jeremiah
Independent Non-Executive Director
Andrew Bodenham
Group Company Secretary
Andrew Bodenham acts as Secretary
to the Senior plc Board and its Committees.
See biography on page 72.
Responsibilities
To challenge the executive Directors and
monitor the delivery of the strategy within the
risk and control framework set by the Board.
Qualifications
BA in Political Science and a qualified lawyer.
Appointment to the Board
Barbara Jeremiah was appointed to the Board
on 1 January 2022. It is intended Barbara will
become the Chair of the Remuneration
Committee upon Celia Baxter’s retirement from
the Board, following a suitable transition period.
Committee membership
Audit, Nominations and Remuneration.
Skills and experience
Barbara is a US citizen and has over 30 years’
experience with Alcoa Inc, in a number of
positions, including Executive Vice President,
Corporate Development and Chairman’s
Counsel. She was formerly Chairwoman of
Boart Longyear Limited and a non-executive
Director of Premier Oil plc and Russel Metals Inc.
Career experience
Barbara was most recently a non-executive
Director and Remuneration Committee Chair of
Aggreko plc from March 2017 to August 2021.
Current directorships/business interests
Chair Designate and Senior Independent
Director of The Weir Group PLC; Barbara was
appointed Senior Independent Director on
1 January 2020. She was previously a non-
executive Director of The Weir Group PLC
from 1 August 2017 until 31 December 2019.
Specific contribution to the Company’s
long-term success
Barbara’s extensive experience in a number
of Senior’s key markets as an executive and
a non-executive Director will complement
those of the existing members of the Board.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
71
EXECUTIVE COMMITTEE
The Executive Committee
oversees the running of all
Senior Group Operations.
1
2
3
4
5
6
7
1. David Squires
See biography on page 70.
2. Martin Barnes
Martin became the Director of Business
Development & Strategy in October 2021,
when he succeeded David Beavan; Martin was
appointed to the Executive Committee on that
date. Prior to this appointment, Martin was the
CEO of Senior Flexonics Lymington and of
Senior Flexonics Upeca. Martin joined the
Senior Group in April 2016.
3. Andrew Bodenham
Andrew was appointed Group Company
Secretary in 2002. He acts as Secretary to
the Senior plc Board and its Committees; he
also sits on the Group’s Treasury Committee.
Prior to joining Senior, Andrew had gained
experience working for businesses in
technology/software, manufacturing,
insurance and aviation services sectors.
4. Launie Fleming
A US citizen, he has worked for the Group
for over 20 years. Launie joined the Executive
Committee upon his appointment as Chief
Executive of Aerospace Fluid Systems in
September 2008. In October 2020, Launie
was appointed Chief Executive of the
Aerospace Division, formed by the consolidation
of the Aerospace Fluid Systems division and
Aerospace Structures division. Prior to these
divisional roles, Launie was the Chief Executive
of Senior Aerospace SSP.
5. Bindi Foyle
See biography on page 69.
6. Jane Johnston
Jane joined the Group in May 2016. A Fellow
of the Chartered Institute of Personnel and
Development, Jane has considerable experience
heading up HR functions across a range of
global geographies. She has worked in a
number of different sectors, including
technology, drug development, construction,
and professional services and, prior to joining
Senior, was Group HR Director at Pace plc.
7. Mike Sheppard
A US citizen, Mike has worked for the Group for
over 30 years and is the Chief Executive of the
Flexonics Division. A qualified engineer, Mike’s
previous positions within the Group included
operational roles at the two largest Flexonics
businesses, Pathway and Bartlett.
David Beavan
David was the Director of Business
Development & Strategy from April 2014 to
October 2021, he was succeeded by Martin
Barnes. David retired from the Group on
31 December 2021.
Michelle Yorke
Michelle was the Director of Risk and
Compliance from September 2018, retiring from
the Group on 31 December 2021. Michelle had
a broad portfolio and, upon her retirement from
the Executive Committee and the Group, a
decision was taken to restructure this role and
split the portfolio. The risk and compliance
duties have transferred to a newly created Head
of Risk and Compliance position and Michelle’s
other duties and responsibilities transferred to
the Director of Business Development &
Strategy. Michelle stepped down from the
Executive Committee on 31 December 2021.
Executive Committee
The purpose of the Executive Committee is
to assist the Group Chief Executive Officer
in the performance of his duties, including:
• the development and implementation
of strategy, operational plans, policies,
procedures and budgets;
• the monitoring of operating and financial
performance;
• the assessment and control of risk;
• the prioritisation and allocation of resources;
and
• the monitoring of competitive forces in each
area of operation.
The Committee is also responsible for the
consideration of all other matters not specifically
reserved for consideration by the Board. A report
on the activities of the Executive Committee
is provided to the Board by the Group Chief
Executive Officer at each Board meeting.
The Committee is comprised of two members
of the Board, David Squires and Bindi Foyle,
together with Launie Fleming (Chief Executive
of the Aerospace Division), Mike Sheppard
(Chief Executive of the Flexonics Division),
Martin Barnes (Director of Business
Development & Strategy), Andrew Bodenham
(Group Company Secretary) and Jane Johnston
(Group HR Director).
Health, Safety & Environment (“HSE”)
Committee
The HSE Committee is not formally appointed
as a Committee of the Board, but oversees all
health, safety and environmental matters across
the Group. Its Terms of Reference can be found
on the Company’s website.
There is a process in place for the Board to be
kept regularly informed of all matters discussed
by the HSE Committee. The Group Chief
Executive Officer provides an HSE update at
every Board meeting and the Group Director
of HSE & Sustainability attends and presents
to the Board twice a year.
The members of this committee are David
Squires (Chairman of the Committee), Mike
Sheppard (Chief Executive of the Flexonics
Division) and Launie Fleming (Chief Executive
of the Aerospace Division). Mark Roden, the
Group Director of HSE & Sustainability, attended
all meetings held during the year. David Beavan
and Michelle Yorke were also members of the
Executive Committee until 31 October 2021
and 31 December 2021 respectively. The
Committee met three times during the year.
72
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
GOVERNANCE REPORT OF THE DIRECTORS
The Directors present their Report and supplementary reports, together with the audited Financial
Statements for the year ended 31 December 2021.
Activities and business review
Senior plc is a holding company. The nature of
the Group’s operations and its principal activities
are set out in the Strategic Report on pages 1 to
64. Its Group undertakings are shown on pages
164 and 165. Six of the Company’s operating
businesses are located in the UK and 20 in the
Rest of the World.
The Strategic Report includes details of Senior’s
business model, strategic priorities, key
performance indicators, risks and uncertainties,
market overview, key growth drivers and a
summary of the Group’s 2021 performance.
Acquisitions and disposals
On 22 April 2021, divested Senior Aerospace
Connecticut; further details of this transaction
can be found on Note 31. As previously
announced, in 2021 we closed both our small
oil & gas business in Malaysia, Senior Flexonics
Upeca, and our Senior Aerospace Bosman
operating business in the Netherlands,
following the transfer of production to our
French Aerospace sites.
Results and dividends
The results for the year are shown in the
Consolidated Income Statement on page 116.
During 2021, no 2020 final dividend was
proposed or paid to shareholders, as part
of the Board’s cash preservation measures
taken in response to the COVID-19 pandemic.
Similarly, no 2021 interim dividend has been
paid to shareholders during the year (2020 – nil
pence) and the Directors do not propose payment
of a 2021 final dividend (2020 – nil pence).
Share capital
The Company has one class of ordinary shares,
which carries no right to a fixed income.
Each share carries the right to vote at general
meetings of the Company. The Company issued
no new shares in 2021; the total number of
shares in issue at 31 December 2021 was
419,418,082. Further details on the Company’s
share capital can be found in Note 25.
Diversity policy
Senior has an Equality, Diversity and Inclusion
policy which is contained within its Code of
Conduct. The policy states that we treat
everyone fairly, equally and value diversity.
We will not make employment decisions on the
basis of anything that does not have a direct
bearing on the ability of any individual to perform
a job. We value diversity and promote equal
opportunities for all employees in a workplace
free of discrimination. We are open, honest and
courteous in our working relationships and we
value individual differences and believe that
creating an environment where everyone feels
included and diversity of thought are valued
strengths of Senior. Further details can be
found on page 24.
Engagement with employees
At Senior, everyone’s opinion matters and this is
reflected in how we engage with our employees.
The Group promotes the dissemination of
relevant information through workshops,
newsletters and a number of other methods,
so that employees are kept regularly advised on
the Group’s and local operational developments.
Where appropriate, local briefing sessions are
held concerning such matters as business
performance, corporate ethics, health and
safety. In 2021, the Group’s employees were
invited to complete a voluntary Employee
Engagement Survey. The survey had an 81%
completion rate and asked for employees’
views and recommendations for areas of
improvement. The feedback from employees
on our response was positive. For further
information, please see Employee Engagement
on pages 24 to 25.
At an Operating Business level, we continue
to gather feedback through locally-managed
Engagement Surveys. While maintaining social
distancing and safety protocols where possible
other activities continued, for example, skip level
meetings, Value workshops, CEO Breakfasts
and All-hands meetings, sharing business
information and encouraging two-way
communication through questions and discussion.
We have also employed new ways of
encouraging two-way communication with
employees. As a result of our engagement with
employees in 2021, we were able to assess the
culture across much of the organisation, providing
feedback to the Board; since the sessions,
the operating businesses have been focusing
on areas for improvement. The Board’s usual
programme of visiting operating businesses
and taking the opportunity to meet with teams
at all levels had again to be undertaken virtually
in 2021. Celia Baxter was able to carry out a
number of UK site visits as part of her employee
engagement role in 2021.
Senior continues to invest in its workforce
through training and development opportunities,
including “Learn”, our global learning
management programme. In addition, the
ongoing roll-out of “Perform”, our performance
management system, ensures there is an
adequate focus on developing skills, abilities and
knowledge of our employees. Across the Group,
we have a range of rewards and recognition
initiatives to encourage employees’ involvement
in business performance. Whilst 2021 continued
to be a challenging year as a result of the
pandemic, engagement with employees was
considered by management to be invaluable and
allowed the Group’s businesses to continue to
operate and support their customers throughout
a number of locally imposed lockdown periods,
where this was permitted by governments.
Policy on employee disability
Senior provides support, training and
development opportunities to all our employees
irrespective of any disabilities they may have.
We give full and fair consideration to disabled
applicants, and where an existing employee
becomes disabled during their employment,
we will make every effort to ensure they are
able to continue working for Senior in their
original or an alternative role.
Engagement with other stakeholders
Senior works hard to create value for all its
stakeholders. By engaging and collaborating
with the key groups of stakeholders, Senior
can ensure its business grows and delivers
long-term sustainable value. During 2021,
members of the Board and senior management
engaged with the Group’s customers, key
suppliers, local communities and shareholders
to seek their views on a number of matters
that may affect them or could be of potential
concern. Further details on this engagement
process can be found on page 40.
Employee share plans
Details of employee share plans are set out in
Note 33.
There are no specific restrictions on the size of a
holding nor on the transfer of shares, which are
both governed by the general provisions of the
Company’s Articles of Association and prevailing
legislation. The Directors are not aware of any
agreements between holders of the Company’s
shares that may result in restrictions on the
transfer of securities or on voting rights. No
person has any special rights of control over the
Company’s share capital, and all issued shares
are fully paid.
With regard to the appointment and
replacement of Directors, the Company is
governed by its Articles of Association,
the UK Corporate Governance Code 2018, the
Companies Act 2006 and related legislation. The
Articles may be amended by special resolution
of the shareholders. The powers of Directors
are described in the Matters Reserved for the
Senior plc Board, which may be found on the
Company’s website. Each year, shareholder
approval is sought to renew the Board’s
authority to allot relevant securities.
There are also a number of other agreements
that take effect, alter or terminate upon a change
of control of the Company, such as commercial
contracts, bank loan agreements, property
lease arrangements, and employee share plans.
None of these are considered to be significant
in terms of their likely impact on the business
of the Group as a whole. Furthermore, the
Directors are not aware of any agreements
between the Company and its Directors or
employees that provide for compensation
for loss of office or employment that occurs
because of a takeover bid.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
73
REPORT OF THE DIRECTORS CONTINUED
Risk management
The Board has ultimate accountability for the
Group’s risk management process, which is
described in detail on pages 48 to 49.
Financial instruments
Note 20 contains disclosures on the Company’s
financial instruments.
Directors
Details of the Directors who served throughout
the year can be found on pages 68 to 71. The
Directors’ interests in the shares of the Company
are included in the Directors’ Remuneration
Report on page 104. No Director has any
interest in contracts with the Company or its
subsidiary undertakings. As shown on page 69,
Susan Brennan was the former Executive Vice
President and the Chief Operations Officer of
Bloom Energy Corporation, having stepped
down from this role on 5 August 2021. Note 51
provides details of the contract Bloom Energy
has with a Group subsidiary. Procedures were
adopted by Bloom Energy which meant Susan
Brennan had no involvement in this contract
during her period of employment with them.
The provisions of the Corporate Governance
Code require that all Directors of FTSE 350
companies should be subject to annual election
by shareholders. Mary Waldner and Barbara
Jeremiah were appointed to the Board in
December 2021 and January 2022, respectively;
they will stand for election at the AGM to be
held in April 2022. Celia Baxter, Susan Brennan,
Bindi Foyle, Giles Kerr, Ian King, Rajiv Sharma
and David Squires will all stand for re-election
at the 2022 AGM.
Board diversity
Senior remains committed to all aspects of
Board diversity, including gender, nationality,
experience, background and personal attributes,
and keeps under review its balance and
composition. The earlier appointments of
Celia Baxter, Susan Brennan and Bindi Foyle
to the Board, and more recently those of
Mary Waldner in December 2021 and Barbara
Jeremiah in January 2022, mean that Senior has
strong female representation on its Board. The
Board strongly believes that its composition is
well-balanced in terms of diversity, including
gender and ethnicity, and that this balance drives
the Group’s business performance and creation
of longer-term sustainable growth.
The Board’s Diversity and Inclusion Policy was
approved in February 2021. The Policy includes
the Board’s commitment to maintaining at least
one-third female representation and at least one
Director from a Black Asian and Minority Ethnic
background on the Board. Currently, 55% of
the Board Directors are female and two of the
Directors are from minority ethnic backgrounds.
The Nominations Committee annually reviews
and approves management development and
succession plans and makes recommendations
to the Board on its structure, size and
composition to ensure that it is appropriate
for the Senior Group.
Directors’ indemnities
Qualifying third-party indemnity provisions
for the benefit of the Directors were renewed
by the Company during the year and remain
in force at the date of this Report.
Research and Design
In 2021, whilst cash preservation measures
were key to ensuring the Group’s stability during
the pandemic, investment for future business
activities was also viewed to be important by
the Board. In 2021, the Group incurred £19.2m
(2020 – £18.7m) on research and design.
Product development and improving
manufacturing processes represent the
primary focus of the Group’s research and
design activities.
Political donations
No political donations were made by the
Company or any of the Group’s operations
during the year.
Greenhouse gas emissions
Our report under the Streamlined Energy and
Carbon Reporting requirements can be found
on page 17.
Major shareholdings
The Company has been notified that the
following shareholders were interested in 3% or
more of the issued share capital of the Company:
Alantra Asset Management
Aberforth Partners
Heronbridge Investment Management
Columbia Threadneedle Investments
BlackRock
Legal & General Investment
Management
Vanguard Group
Janus Henderson Investors
% at
9 February
2022
18.48
8.46
7.15
4.73
4.11
4.04
3.62
3.38
So far as is known, no other shareholder had a
notifiable interest amounting to 3% or more of
the issued share capital of the Company, and
the Directors believe that the close company
provisions of the Income and Corporation
Taxes Act 1988 (as amended) do not apply
to the Company.
Compliance with the UK Corporate
Governance Code
The Company’s statement of compliance with
the provisions of the UK Corporate Governance
Code 2018 issued by the Financial Reporting
Council is set out on page 65. This Code is
publicly available on the Financial Reporting
Council’s website: www.frc.org.uk. The Chair’s
Governance Letter on pages 65 and 67 forms
part of this Report of the Directors.
Remuneration Report and Policy
The 2021 Annual Report on Remuneration is
to be put to shareholder vote at the 2022 AGM.
Following a triennial review, the Directors’
Remuneration Policy was approved by
74
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
shareholders at the 2021 AGM and took effect
from 1 January 2021. Details of the Directors’
Remuneration Policy can be found on pages
92 to 97.
Annual General Meeting
The Notice of Annual General Meeting
describes the business to be considered
at the hybrid AGM to be held at 11.30 am on
Thursday 21 April 2022 at Ironmongers’ Hall,
Off Shaftesbury Pl, Aldersgate St, Barbican,
London EC2Y 8AA. The AGM can also be
attended virtually. Please see the Notice of
Annual General Meeting 2022 for the details
of the AGM; a copy may be found on the
Company’s website.
Acquisition of the Company’s own shares
The Company purchased no ordinary shares of
10 pence each in the capital of the Company;
no shares (2020 – nil shares) were purchased
by the Senior plc Employee Benefit Trust in the
year to satisfy the future vesting of executive
share awards and employee share plans.
At the end of the year, the Directors had
authority, under a shareholders’ resolution
dated 23 April 2021, to make market purchases
of the Company’s shares up to an aggregate
nominal amount of £42m (2020 – £42m), which
represented approximately 10% of the issued
share capital of the Company. A resolution to
renew this authority will be proposed at the
forthcoming AGM.
Auditor
• Each of the persons who is a Director of
the Company at the date of approval of this
Annual Report confirms that so far as the
Director is aware, there is no relevant audit
information of which the Company’s Auditor
is unaware; and
• the Director has taken all steps that he/she
ought to have taken as a Director in order
to make himself/herself aware of any
relevant audit information and to establish
that the Company’s Auditor is aware of
that information.
This information is given and should be
interpreted in accordance with the provisions
of Section 418 of the Companies Act 2006.
In 2016, the Group undertook a formal tender
process for its external audit function, which
resulted in KPMG LLP being appointed the
Group’s External Auditor for the financial year
commencing 1 January 2017. KPMG’s
re-appointment was last approved by the
Company’s shareholders at the 2021 AGM.
In accordance with Section 489 of the
Companies Act 2006, a resolution for the
re-appointment of KPMG LLP as Auditor
of the Company is to be proposed at the
forthcoming AGM.
By Order of the Board
Andrew Bodenham
Group Company Secretary
25 February 2022
GOVERNANCE DIRECTORS’ DUTIES
Under the Companies Act 2006, each of our Directors must: act within their powers;
promote the success of the Company; exercise independent judgment; exercise reasonable
care, skill and diligence, and avoid conflicts of interest.
In July 2018, The Financial Reporting
Council published a revised Corporate
Governance Code, which was designed
to set higher standards of corporate
governance to promote transparency
and integrity in business.
The 2018 Corporate Governance Code
established five new principles:
1 Leadership and purpose
2 Division of responsibilities
3 Composition, succession
4 Audit, risk and internal control
5 Remuneration
and evaluation
Leadership and purpose
Company purpose, values and strategy
The Board is responsible for Group decisions
affecting governance, strategy and the approval
of annual operating budgets and Financial
Statements. It also approves significant financial
and contractual commitments made by the
Group. The Board’s Terms of Reference were
updated in 2021 and more fully describe the
responsibilities of the Board; the Matters
Reserved for the Board may be found on the
Company’s website.
The Board meets formally on a regular basis,
20 times in 2021; in addition, there were five
meetings of the Audit Committee in 2021,
together with seven meetings of the
Remuneration Committee and six meetings
of the Nominations Committee. A table showing
Board and Committee meeting membership
and attendance is shown on page 66. Other
Committees are appointed by the Board to
deal with treasury matters, disclosure matters
and specific matters such as acquisitions
and disposals.
The Company’s purpose is stated on page 1.
Senior aims to create long-term sustainable
value for all its stakeholders through its business
model. Six strategic priorities have been
identified as key elements of the Company’s
business model, in order to drive the creation
of shareholder value. Details of the Group’s
Business Model and Strategic Priorities can be
found in the Strategic Report on pages 30 to 31,
34 to 35.
The Board recognises its role in assessing and
monitoring the Group’s culture. To that effect,
“Culture” has been made a regular Board
agenda item. The Board deploys various
initiatives to monitor culture, from participating
in site visits to reviewing qualitative and
quantitative evidence of culture (succession
plans, Health & Safety reporting, whistle-
blowing notifications, payment practices reports
and training completion rates). During 2021,
where we were not able to rely solely on
face-to-face Board meetings, virtual meeting
methods were used as an alternative and
proved to be very effective.
The Board demonstrated its strength and
adaptability when guiding the Group during the
potential offer for the Company by Lone Star, as
well as its response to the continued pandemic.
At the Board’s Annual Strategic Review meeting
held in October 2021, the Group’s Strategy was
tested, taking into account recent events and
the impact of the pandemic on the Group’s end
markets, and was found to be still relevant by
the Board.
Division of responsibilities
The Board delegates a certain number of its
responsibilities to the Audit, Remuneration,
Nominations, and Health, Safety & Environment
Committees. The Group Chief Executive Officer,
together with the Executive Committee,
is responsible for the implementation of the
decisions made by the Board and for the
day-to-day conduct of the Group’s operations.
During 2021, the Chair met with the non-
executive Directors to discuss matters in
confidence, without the executive Directors
being present; this is in line with good practice.
In 2021, the minutes arising from all Committee
meetings are made available to the Board.
There are procedures in place to ensure that all
Directors are properly briefed, so that decisions
taken by the Board are based on the fullest,
up-to-date, available information. The non-
executive Directors are encouraged to visit
the Group’s operations to meet the local
management teams and discuss any issues that
they may face; this process continued to be held
by virtual meetings during 2021, in accordance
with COVID-19 travel restrictions imposed by
governments. Our Senior Independent Director,
Celia Baxter , who is the nominated Director
responsible for employee enaggement, was
able to visit a number of UK sites towards
the end of the year. In 2021, at every Board
meeting, there were reviews of health,
safety and environmental performance, and
operational, financial and administrative matters.
Social and ethical issues, reported whistle-
blowing incidents, and the agreement of
budgets and levels of insurance cover were
reviewed whenever appropriate.
There is a procedure by which all Directors can
obtain independent professional advice at the
Company’s expense in furtherance of their
duties, if required, and they have been made
aware of this.
To enable the members of the Board and its
Committees to discharge their duties effectively,
the Chairman ensures that accurate and clear
information is provided to all Directors in a timely
manner in advance of meetings. The Group
Company Secretary supports the Board to
ensure that it has in place appropriate policies,
processes, time and resources to enable it to
operate efficiently and effectively.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
75
DIRECTORS’ DUTIES CONTINUED
I am confident that Senior has the
requisite diversity of skills, people, and
experience that will guide the Company
in delivering value for all our stakeholders.”
Ian King
Chair
COMPOSITION, SUCCESSION
AND EVALUATION
NOMINATIONS COMMITTEE REPORT
Dear Shareholder,
Overview
The Nominations Committee is chaired by me
and comprises all non-executive Directors. The
Group Company Secretary acts as Secretary to
the Committee. Senior members of management
and advisers are invited to attend meetings
when deemed appropriate. There were six
scheduled meetings of the Committee in 2021.
Two members constitute a quorum for the
Nominations Committee. The Committee’s
attendance records are shown on page 66.
The Committee is tasked with administering
the process for appointments, considering
succession planning, regularly reviewing such
processes and overseeing the composition
of the Board. The Nominations Committee’s
Termsof Reference can be found on the
Company’s website.
Appointments to the Board
The Nominations Committee typically enlists
an external consultancy firm to assist with the
appointment of Directors to the Board. In 2021,
two consultancy firms, Korn Ferry and Sam Allen
Associates Limited, were engaged separately
to assist with the recruitment of the Board
members recently appointed. The Company
provided the relevant appointed firm with a role
description, together with the required skills and
personal attributes to be considered for the role.
The appointed firm filtered a list of candidates
down to a number of those that they felt met the
skills and attributes required, then conducted
preliminary interviews with the selected
candidates. The candidates were then referred
to Senior for interview, together with a written
analysis on each candidate, with each candidate
being interviewed by a number of members of
the Board. The Nominations Committee also
took up references on the preferred candidates.
The final recruitment decisions were taken
by the Board as a whole.
In addition, the Nominations Committee
sought confirmation that candidates under
consideration would have sufficient time to
carry out their duties as a Director of the Board,
if appointed. The time commitment of the
Directors is kept under review and the potential
for over-boarding monitored and discouraged.
Mary Waldner was appointed to the Board on
1 December 2021 and Barbara Jeremiah was
appointed to the Board on 1 January 2022.
Following the appointments of Mary and
Barbara, a full and comprehensive induction
programme is taking place. The induction
process includes areas such as financial
forecasts, Group strategy and values; ethics
and training on the Code of Conduct, together
with other relevant topics. Visits to the Group’s
operations by the newly appointed Directors
will also be undertaken.
The Nominations Committee and the Board
have been taking due regard of Lord Davies’
review into Women on Boards (February 2011),
the Hampton-Alexander Review: FTSE Women
Leaders (November 2016) and the Hampton-
Alexander Review: Improving Gender Balance
in FTSE Leadership (November 2017). I am
pleased to report that the Board is supportive
of the aim to increase diversity and the level
of female representation in Board and senior
leadership positions. Following Barbara
Jeremiah’s appointment, five of the nine
Directors are currently female (55%).
In addition, the Nominations Committee
and the Board have ensured the Board’s
composition is diverse in terms of the Directors’
ethnic backgrounds, as recommended by the
Parker Review; further detail can be found
on page 74.
Two of the seven members of the Executive
Committee are currently female (28%).
A third female member, Michelle Yorke, retired
from the Executive Committee at the end of
December 2021, following five and a half years’
service with the Company, most recently as its
Director of Risk & Compliance.
The Board has been proactive in further
promoting diversity and equality of all kinds
throughout the Group, regardless of geography
or position. The Committee regularly discusses
the benefits of diversity with regard to the Board
and its Committees.
Extension of appointments to the Board
In 2021, no Board Directors’ appointments were
extended.
Succession planning
The Committee regularly considers the
matter of succession planning for Board-level
and the Group’s senior management roles.
Cognisant of terms of Celia Baxter and
76
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
Giles Kerr, the Committee followed its
recruitment process, described above, and
appointed Mary Waldner and Barbara Jeremiah
to the Board in December 2021 and January
2022, respectively, thereby allowing for a
suitable transition period between them and the
two departing Board members. Mary’s and
Barbara’s skills and previous work experience
make them a good fit for the Company and
complement those of the existing Board
members; a summary of their biographies can
be found on pages 70 to 71.
The Group continues to focus on maximising
the potential of its employees and improving
succession planning. The Executive Committee,
supported by the Group HR Director, conducted
an extensive review of senior executive
succession plans. The review identified key
employees who are considered capable of
being developed into leadership roles, which is
critical to the success of the Group. Appropriate
plans are in place to ensure there is a mix of
employees within the Group who could fill
key roles in the short and longer term.
In 2021, the Nominations Committee reviewed
the Group and divisional succession plans and
maintained its focus on further strengthening
diversity in these plans particularly gender
diversity in operational roles.
Independence
The Nominations Committee and the Board
consider all of the non-executive Directors to
be fully independent and free from conflicting
interests which could cause difficulties whilst
carrying out their duties. Senior considers its
non-executive Directors to be proactive in
contributing their respective experiences and
skills gained from a range of sectors. Conflicts
of interests are fully disclosed by Directors upon
appointment and are reviewed on a regular basis
throughout each year.
I am confident that Senior has the requisite
diversity of skills, people, and experience that
will guide the Company in delivering shareholder
value. This Report was reviewed and approved
by the Nominations Committee and signed on
its behalf by:
Ian King
Chair of the Nominations Committee
25 February 2022
GOVERNANCE
Nominations Committee
The Company’s Nominations Committee
leads the process for Board appointments
and supervises leadership development
and succession planning. It also makes
recommendations to the Board on all new
Board appointments and re-appointments,
further details of which can be found on page
76. The Committee, which consists entirely of
non-executive Directors, is chaired by Ian King;
its composition is shown on page 66.
Details of the Directors’ external statutory
appointments can be found in their biographies
on pages 68 to 71. The Board believes that the
Directors’ experience of working with other
companies adds value to their contribution to
the Company’s Board and Committee meetings.
In compliance with the Corporate Governance
Code, all continuing Directors offered
themselves for re-election at the Company’s
AGM 2021. All Directors will again offer
themselves for election or re-election at the
2022 AGM. The resolutions to be put to
shareholders at the 2022 AGM can be found
in the Notice of Annual General Meeting,
which is available on the Company’s website.
The Board confirms that in 2021 all Directors
in office at the time worked assiduously and
diligently, particularly in addressing the situation
arising from the potential Lone Star bid, as well
as the impact of the continued pandemic. Each
Board member made a positive contribution
to the running of the Company and the Board
confirms that they will continue to work to
ensure its long-term success.
Remuneration
The Remuneration Report on pages 87 to 107
fully describes the Board’s approach to
remuneration matters.
Board effectiveness
The Board is structured under a non-executive
Chair and currently comprises two executive
Directors and six independent non-executive
Directors, who were each selected for
appointment because of their wide industrial
and commercial experience. The Directors
believe that the Board and its committees have
the appropriate balance of skills, experience and
knowledge to enable them to fulfil their duties
and responsibilities effectively. The Nominations
Committee regularly reviews the composition
of the Board.
Board diversity and inclusion
The Group seeks to ensure diversity in the
composition of its Board, including, amongst
other qualities, diversity of gender, social and
ethnic backgrounds, cognitive and personal
skills. The Company’s female representation on
the Board complies with the recommendations
of the Hampton-Alexander Review, and meets
the proposals on ethnic diversity outlined by
the Parker Review. Furthermore, we endeavour
to incorporate diversity into our recruitment
process by engaging, wherever possible, with
recruitment firms that have committed to follow
the Voluntary Code of Conduct for Executive
Search Firms, and by widening the pool of
candidates from diverse backgrounds.
Board induction and development
Appointments to the Board are made following
a rigorous, formal, recruitment process
supported by professional consultants. All
Directors receive induction upon joining the
Board and are encouraged to update their
knowledge and skills on a frequent basis. The
Nominations Committee has arranged for Mary
Waldner and Barbara Jeremiah, our recently
appointed non-executive Directors, to receive
early and appropriate induction and all Directors
already in office continued to receive regular
updates on statutory matters. The Group
Company Secretary provides the Board with
statutory and regulatory updates at every Board
meeting and notifies them of any pressing
points that are relevant between meetings.
The Directors are cognisant of the fact that the
Board, and its Committees, should have the
appropriate combination of skills, experience
and knowledge to enable them to carry out their
duties effectively. Membership of the Board and
its Committees is kept under regular review and
refreshed when appropriate, taking into account
the Directors’ lengths of service and their ability
to devote sufficient time to Company matters.
Evaluation of the Board and the Directors
The Board felt that it was appropriate to
complete an external evaluation for the
second year running, given the extreme
challenges of operating in a COVID-19
environment. We again used EquityCulture
Limited (formerly Equity Communications
Limited) to maintain continuity. The evaluation
was carried out through individual confidential
interviews with each Director.
EquityCulture Limited was very positive
about the manner in which the Board had
operated and made only a limited number of
recommendations for the Board to consider.
The Board was found to have functioned well
during 2021, having met a total of 20 times.
It had made effective use of video conferencing
for the Board and its Committee meetings and
had been flexible and adaptive to the dynamics
the Company was facing.
The 2021 evaluation findings showed that the
Board had operated effectively and robustly
throughout the particularly difficult year and
made some suggestions for additional focus.
The main recommendation centred around
Board succession, ensuring Mary Waldner and
Barbara Jeremiah were not rushed and given
appropriate time to complete their induction in
this challenging environment. We invested early
in succession planning for Celia Baxter and Giles
Kerr and have time to optimise the process.
The other points raised were ensuring strategy
forms part of every Board meeting agenda and
ensuring the Directors have good access to the
Executive teams, as we review performance
and strategy. The meeting structures of virtual,
hybrid and physical are also under review.
We have adapted to change well through 2020
and 2021, and as a Board and we must not lose
the momentum. The findings will add to the
Board’s development as we enter the recovery
phase of our end markets and strategic growth
of the Company.
EquityCulture Limited has no other connection
with the Company or its Directors.
In addition, the Chair undertakes individual
reviews of each Director and provides
feedback and guidance on their performance
and contribution to the Board. The Senior
Independent Director, in consultation with the
non-executive Directors, undertakes a similar
review process of the Chair.
Succession planning
The Nominations Committee met six times
during the year and considered succession plans
for Board-level and senior management roles.
The Group has continued to increase its focus
on maximising the potential of its employees
and improving succession planning. The Group
Chief Executive Officer and Group HR Director
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
77
DIRECTORS’ DUTIES CONTINUED
present a detailed Executive Succession Plan
for each Executive Committee role, to the
Nominations Committee twice a year. This
ensures that the Nominations Committee is able
to undertake a detailed review of the succession
plans for the Executive Committee, the talent
pipeline, and a talent profile for each member of
the Executive Committee. The review includes
discussions regarding individuals’ strengths
and areas for development plans. As a result,
development activities are identified, for
example, supporting the Executives in pursuing
external non-executive director roles. Prior to
the 2021 Nominations Committee review, the
Executive Committee, supported by the Group
HR Director, conducted an extensive review
of the Group’s operating business leadership
succession plans. By utilised skills and talent
mapping this assists both the Executive
Committee and, ultimately, the Nominations
Committee in identifying any gaps, taking
into account the Group’s long-term strategy
to provide a solid foundation for Senior’s
growth aspirations.
When reviewing succession plans, the
Committee recognises the benefits of a diverse
workforce, diversity of thought and employing
individuals from different backgrounds and
experience across the organisation, including
Board members and senior managers.
In 2021, the Executive Directors undertook a
separate succession-planning exercise to find
suitable successors for David Beavan, our Group
Director of Business Development & Strategy,
and Michelle Yorke, our Group Director of Risk &
Compliance, in preparation for their retirements
in late 2021. The current composition of the
Executive Committee can be found on page 72.
AUDIT, RISK AND INTERNAL
CONTROL
Resources, internal controls and risk
management
The Board has ultimate accountability for the
Group’s risk management process.
The Board determines the nature and extent
of the significant actions necessary to achieve
its strategic objectives and maintains a sound
system of internal control. The Company’s Audit
Committee reports to and, for certain matters,
advises the Board of Directors. The Audit
Committee Report on pages 80 to 86 describes
the role and activities of the Audit Committee,
together with the significant risks and
judgments that it considered in relation to the
2021 Financial Statements and its relationship
with the internal and External Auditors. Details
of the Group’s approach to risk management
and its Risk and Assurance Framework can be
found on pages 48 to 49.
Communicating the Senior plc Code of
Conduct and operating with integrity
In 2021, the executive Directors published an
updated booklet for issue to all employees and
relevant third parties, explaining the Group’s
Code of Conduct (the Code) and Senior’s
Values; these values can be found on page 30.
The booklet includes a message from the Group
Chief Executive Officer, explaining that it is his
unshakeable belief that how you do business
is as important as what you do in business.
It contains work-related scenarios, together
with a selection of questions and answers, to
help employees to understand the Code and
relate it to their individual roles and working
environment. Copies of the Code are issued
to all new employees and reissued periodically
to continuing employees to remind them of
the required level of conduct.
Senior trains its employees on the requirements
of the Code upon induction, educating them
on what they can and cannot do, and how to
address any ethical dilemmas they may face.
A compulsory 2021 Global Code of Conduct
online training course was rolled out across the
Group to all employees during the year. The
2021 course contained training modules on:
Global Anti-bribery, Preventing Harassment &
Promoting Respect and Protecting Human
Rights; all employees and Directors were
required to achieve a Pass grade, as a minimum.
Typically, all the Group’s operations are visited
by the Group Chief Executive Officer, the Group
Finance Director or other members of the
Executive Commiittee on an annual basis and
make presentations to local senior management,
reinforcing the Code and the importance of
maintaining an absolute commitment to the
highest possible standards of ethics and a zero
tolerance towards bribery and corruption.
Because of the travel restrictions imposed as
a result of COVID-19, physical presentations
were not possible in 2021; however, the Code
was reinforced by the executive Directors and
Executive Committee by regular meetings and
the ongoing training of employees. The Board
verifies compliance with the Code through
its internal audit programme, ensuring that
employees have received the mandatory training
and that the Group’s businesses operate with
integrity at all times and in compliance with
the Code.
Operating with integrity and in an ethical
manner builds trust with customers and other
stakeholders and underpins the Board’s
strategic objectives.
Human rights
The Group recognises the importance of the
Universal Declaration of Human Rights and
adheres to the core principles and values
defined within it. The majority of countries in
which Senior operates have their own laws
banning child labour and promoting human
rights. Senior monitors the ages of its workforce
across the world to ensure compliance and
identify any potential succession issues.
Senior is committed to preventing slavery and
human trafficking in its corporate activities and
throughout its supply chain. Senior does not
restrict any of its employees in any of the
countries in which it operates from joining a
trade union if they wish to do so. Senior also
works closely with its suppliers to ensure that
they at least meet internationally recognised
minimum requirements for workers’ welfare
and conditions of employment. Senior publishes
a Modern Slavery Act Statement, which is kept
under review and updated as necessary; the
current statement has been signed by the
Group Chief Executive Officer and was
published in March 2021, it is available
on the Company’s website.
Reporting and investigating concerns
and whistle-blowing
As part of its internal control procedures, the
Company has a Whistle-blowing Policy that is
communicated throughout the Group. This
policy provides employees with the opportunity
to report suspected unethical or illegal corporate
conduct confidentially and anonymously.
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SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
GOVERNANCE Senior plc is committed to maintaining high
ethical standards across the Group. Employees
and representatives of Senior have an obligation
to act honestly, with integrity, and to comply
with applicable laws. Consequently, employees
are encouraged to report any suspected
unethical or illegal corporate conduct in
accordance with this Policy.
Senior will not tolerate the harassment or
victimisation (including the application of
informal pressure) of a person reporting
corporate conduct in good faith. In addition to
the legal protection provided to such employees,
Senior will treat retaliatory conduct in violation
of this Policy as a serious disciplinary offence.
The Group encourages its employees to discuss
any ethical concerns that they may have with
local management, or at Group level if more
appropriate. Where an employee feels unable
to approach local or Group management, or are
dissatisfied with the response, they can contact
Senior’s third-party whistle-blowing service
provider by telephone, a web reporting tool or, in
some languages, an App. The provider will pass
on information to an investigating officer within
Senior, maintaining anonymity of the individual,
if requested.
All reports of suspected unethical or illegal
corporate conduct are independently
investigated and tracked from inception to
resolution and, where necessary, actions are
taken to rectify any weakness in systems that
may have been identified. These actions, and
the overall integrity of the reporting system,
are subject to regular scrutiny by the Audit
Committee. This process is also available to
third parties, such as suppliers and customers.
Subject to confidentiality considerations, the
outcome of each investigation is provided,
insofar as it is possible, to the individual who
reported the concern. All reported whistle-
blowing incidents are reviewed by the Board
of Directors, which the Company believes
to be the most appropriate forum.
Celia Baxter is the Company’s Senior
Independent Director, providing employees
and third parties with an alternative channel of
communication to resolve issues if they have a
concern that the Chair, Group Chief Executive
Officer or Group Finance Director have failed
to resolve the issues, or where such contact
with them is not appropriate.
Managing external sales agents and
representatives
Senior has in place a Responsible Sourcing
Policy which establishes the minimum
standards expected of our supply chain.
Senior plc is committed to the highest possible
standards of environmental, ethical and social
responsibility performance in respect of all its
products and services. Senior strives to be the
best for its customers and its people and looks
to make a positive contribution to society
wherever it operates. Adherence to this policy
is mandatory and all Group operations are
required to ensure that they are aware of the
requirements of the policy.
The Board recognises the potential bribery and
corruption risks posed by the markets in which
the Group operates and, in particular, the use of
third-party intermediaries it engages. All external
sales agents and representatives working on
behalf of Senior across the world are required
to operate in compliance with Senior’s Code of
Conduct or have their own code of conduct of
an equivalent high standard. Local management
is required to conduct a due diligence and risk
assessment process prior to engaging or
re-appointing any sales agents and to issue
them with a copy of the Code, ensuring that
they understand, acknowledge and accept
its requirements.
International trade compliance
The Code of Conduct includes a section
dedicated to Complying with International
Sanctions and Trade Compliance Requirements;
it states “Senior will conduct its business in
full compliance with all global trade laws and
regulations and all relevant sanctions for the
import and export of goods and services in the
countries within which it operates.”
Managing gifts and hospitality
The Board recognises that gifts and hospitality
have the potential to create a conflict of interest,
or the perception of a conflict of interest. As a
result, there is a Group policy restricting the
receiving and giving of gifts and hospitality from,
and to, third parties. This policy requires that all
gifts and hospitality must be recorded annually
through a self-declaration process. The Internal
Audit Manager assesses adherence with the
Group’s gifts and hospitality policy during
internal audit visits, which are carried out
physically or virtually.
Group information and operations business
security policy and data protection
The Group’s confidential information is valued
highly by the Board, and in 2019 a Group Head
of Information Security was appointed. In 2019,
an Acceptable Use Policy was issued to provide
guidelines for the acceptable and appropriate
use of Information and Operational Technologies
by all Group employees. The policy sets out
the controls that are in place to help reduce
risk associated with the inappropriate use of
Information and Operational Technologies,
which could lead to data loss, manufacturing
disruption, virus or malware infection or other
issues that could have a negative financial
or reputational impact on the Group. In
compliance with the Data Protection (Charges
and Information) Regulations 2018, the
Company is registered with the Information
Commissioner’s Office.
In 2021, all Group employees continued to
receive regular updates on information security,
supported by internal newsletters and posters,
alerting them to key current issues, such as
cyber security.
To ensure compliance with the General Data
Protection Regulations (GDPR), both in the EU
and the UK, the Company and all relevant Group
operations have in place a GDPR policy and
breach incident procedure which have been
communicated to their employees. As the
Company is not a public authority, its core
activities do not require regular and systematic
monitoring of individuals on a large scale and it
does not process special categories of personal
data, criminal convictions or offences data on a
large scale, it is not required to appoint a data
protection officer. However, the Company and
relevant Group operations each have a Data
Protection Champion, whom employees
can approach for guidance if they have any
queries or concerns relating to data protection.
Compliance with data protection regulations will
continue to be monitored on an ongoing basis.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
79
DIRECTORS’ DUTIES CONTINUED
In 2021, the Group further strengthened
its risk management procedures and
these have been reviewed by the
Audit Committee.”
Giles Kerr
Chair of the Audit Committee
AUDIT COMMITTEE REPORT
Dear Shareholder,
The Audit Committee has been established by
the Board and consists entirely of independent
non-executive Directors. The primary role of
the Audit Committee is to maintain the integrity
of the financial reporting of the Group and to
ensure appropriate risk management and
internal control procedures. To enable the
Audit Committee to fulfil this role, its main
responsibilities include:
• conducting the process for selecting
the External Auditor and making
recommendations to the Board, and
ultimately shareholders for approval, of
the appointment of the External Auditor,
the audit fee, initiating tender processes in
accordance with regulatory requirements,
and the resignation or dismissal of the
External Auditor;
• if an External Auditor resigns, investigating
the issues leading to this and deciding
whether or not any action is required;
• monitoring and assessing annually the
independence and objectivity of the External
Auditor, its compliance with regulatory
requirements, the effectiveness of the
external audit process and authorising the
provision, if any, of non-audit services and
the impact this may have on independence;
• monitoring the integrity of the Company,
including its annual and the half-yearly reports,
preliminary announcements and related
formal statements. Reviewing and reporting
to the Board on significant financial reporting
issues and judgments which those
statements contain, having regard to matters
communicated to it by the Auditor. Reviewing
any other statements requiring Board
approval which contain financial information
where practicable and consistent with any
prompt reporting requirements. Where the
Committee is not satisfied with any aspect
of the proposed financial reporting by
the Company, it shall report its views to
the Board;
• reviewing the Company’s statement on
the Annual Report & Accounts prior to
endorsement by the Board, that taken as a
whole the Annual Report & Accounts is fair,
balanced and understandable and provides
the information necessary to assess the
Group’s position and performance, business
model and strategy;
• discussing with the External Auditor issues
and reservations, if any, arising from the
year-end audit and the half-year review,
and any other matters the External Auditor
may raise;
• reviewing and approving the terms of the
External Auditor’s engagement, including
the management representation letter
addressed to the External Auditor at the
start of each audit;
• reviewing the longer-term viability and
the going concern basis of accounting in
preparation of the Financial Statements
of the Group;
• approving the appointment or termination
of appointment of the Head of Risk
& Compliance;
• reviewing the effectiveness of the internal
audit function (currently headed by the
Group’s Head of Risk and Compliance);
considering the major findings of internal
audit activities and management’s response;
ensuring co-ordination between the internal
audit function and the External Auditor;
reviewing and approving the role and mandate
of the internal audit function. Annually
approving the Internal Audit Charter, ensuring
it is appropriate for the Group’s current needs,
that the function is adequately resourced and
has appropriate standing within the Group;
• ensuring the internal audit function has
unrestricted scope, the necessary resources
and access to information to enable it to
fulfil its mandate, ensuring there is open
communication between different functions
and that the internal audit function evaluates
the effectiveness of these functions as part of
its internal audit plan, and ensuring that the
internal audit function is equipped to perform
in accordance with appropriate professional
standards for internal auditors;
• ensuring the internal Auditor has direct
access to the Board Chair and to the Audit
Committee Chair, providing independence
from the Executive and accountability to the
Audit Committee;
• carrying out an annual assessment of the
effectiveness of the internal audit function;
• reviewing the effectiveness of the Group’s
internal controls systems that identify, assess,
manage and monitor financial risks, and
other internal control and risk
management systems;
• developing and recommending to the Board
the Group’s Policy for the Provision of
Non-Audit Services by the External Auditor,
including specifying permitted non-audit
services and their approval requirements;
• ensuring the External Auditor’s remuneration
fee level is appropriate to enable an effective
and high quality audit;
• monitoring the External Auditor’s processes
for maintaining independence, its compliance
with relevant law, regulation, other
professional requirements and the
Ethical Standard;
• ensuring the co-ordination of the External
Auditor and the internal audit function;
• agreeing with the Board a Policy on the
Employment of Former Employees of the
Group’s External Auditor, taking into account
the Ethical Standard and legal requirements,
and monitoring the application of this Policy;
• understanding the strategy at both Group and
operational levels to ensure that business
risks and other relevant issues are effectively
identified and communicated to the Board;
• assessing the Audit Committee’s capabilities
in relation to diversity, risk experience and
the financial expertise of its members;
• understanding the implications of changes
to accounting standards;
• ensuring the Company’s corporate ethics,
anti-bribery and compliance procedures are
up to date in terms of addressing the potential
risks of fraud and misconduct;
• reviewing the Group’s Whistle-blowing Policy,
to ensure that appropriate procedures are in
place for employees, contractors and external
parties to raise, in confidence, any concerns
that they may have relating to suspected
malpractice, illegal acts, omissions or other
unethical corporate conduct, regarding
financial or other matters; and ensuring that
arrangements are in place for investigation
of such matters and follow-up action;
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SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
GOVERNANCE
• giving due consideration to all relevant laws
and regulations, the provisions of the Code
and published guidance, the requirements of
the FCA’s Listing Rules, Prospectus Rules and
Disclosure Guidance and Transparency Rules
sourcebook, and any other applicable rules;
• after each Audit Committee meeting, the
Audit Committee Chair formally reports
to the Board on its proceedings and how
the Committee has discharged its duties;
• working and liaising with all other Board
Committees, ensuring interaction between
the Committees and the Board is reviewed
regularly; and
• considering any other topics specifically
delegated to the Audit Committee by the
Board from time to time.
The Audit Committee is required to report its
findings to the Board, identifying any matters
where it considers that action or improvement
is needed, and to make recommendations as
to the steps taken.
Composition of the Audit Committee
The Terms of Reference for the Audit
Committee state that the Audit Committee shall
be appointed by the Board from amongst the
independent non-executive Directors of the
Company, excluding the Company Chair, at least
one of whom shall have recent and relevant
financial experience. The Audit Committee shall
consist of not less than three members, of
which all shall be independent of any business
connection with the Group. Appointments to
the Audit Committee shall be for a period of up
to three years, which may be extended by a
maximum of two additional three-year periods,
subject to the members remaining independent.
One Audit Committee member, Susan Brennan,
was the Executive Vice President and the Chief
Operations Officer of Bloom Energy Corporation
until 5 August 2021, when she left to become
the President of Romeo Power. Note 51
provides details of the contract Bloom Energy
has with a Group subsidiary. Procedures were
adopted by Bloom Energy which meant Susan
Brennan had no involvement in this contract.
The Audit Committee is composed entirely of independent non-executive Directors,
as shown below:
Member
Giles Kerr (Committee Chair)
Celia Baxter
Susan Brennan
Rajiv Sharma
Mary Waldner
Appointment date
2 September 2013
2 September 2013
1 January 2016
1 January 2019
1 December 2021
Retirement date
–
–
–
–
–
Barbara Jeremiah was appointed to the Audit Committee on 1 January 2022.
The Board expects the Audit Committee to have
an understanding of:
• the principles, contents and developments
in financial reporting, including the applicable
accounting standards and statements of
recommended practice;
• the key aspects of the Group’s operations,
including corporate policies, its products and
services, Group financing, and systems of
internal control;
• the matters that could influence or distort
the presentation of accounts and key figures;
• the principles of, and developments in,
company law, sector-specific laws and other
relevant corporate legislation;
• the roles of internal and external auditing
and risk management; and
• the regulatory framework for the
Group’s businesses.
The full Terms of Reference of the
Audit Committee may be found on the
Company’s website.
Two members constitute a quorum for the Audit
Committee. The Group Company Secretary acts
as Secretary to the Audit Committee.
There was full attendance at every Audit
Committee Meeting held during 2021.
Collectively, the members of the Audit
Committee have significant commercial and
financial experience at a senior management
level. Giles Kerr has the recent and relevant
financial experience required by the UK
Corporate Governance Code to chair the Audit
Committee. For details of the qualifications of
members of the Audit Committee, please refer
to the Board of Directors’ biographies shown
on pages 68 to 71.
No member of the Audit Committee has any
connection with the company’s External Auditor,
KPMG LLP.
Audit Committee’s Terms of Reference
Periodically, the Audit Committee’s Terms of
Reference are reviewed to take into account
current views on good practice and recent
updates to the UK Corporate Governance Code.
The UK Corporate Governance Code 2018 was
adopted by the Audit Committee from the
accounting period beginning on 1 January 2019.
The Audit Committee’s Terms of Reference
were updated in December 2021.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
81
DIRECTORS’ DUTIES CONTINUED
Activities of the Audit Committee
The Audit Committee met on 23 February and 4 March 2021 to consider the 2020 year-end report and during the subsequent 12 months conducted
the following business on the three standard scheduled meeting dates, as indicated below:
28 July 2021
30 September 2021
22 February 2022
• Received and considered an Internal Audit
Report including Risk & Assurance and
Mapping reports presented by the Group’s
Director of Risk & Compliance.
• Noted the UK Government’s proposals
for strengthening the UK’s internal
controls framework.
• Noted the recommendations of UK
Government agencies, which related to the
Company’s Annual Report & Accounts 2020.
• Reviewed the accounting presentation and
judgemental issues, and the funding and
liquidity reports for the half-year ended
30 June 2021, which included consideration
of compliance with all debt covenants
at all measurement dates out to
31 December 2022.
• Discussed and approved the External
Auditor’s confirmation of the 2021 audit
scope, strategy, materiality and fee.
• Noted KPMG LLP’s Lead Partner succession
plan and U.S. Audit overview.
• Discussed the FRC’s report on findings on
key matters relevant to the audit quality at
KPMG LLP in relation to its audits of banks
and similar entities.
• Reviewed the effectiveness of the
external audit.
• Assessed the significant risks that are
considered by the Audit Committee,
agreeing they would remain unchanged
from 2020, with the exception of goodwill
which was no longer considered to be a
significant risk.
• Reviewed, challenged and agreed the basis
• Addressed Government agency
recommendations on the Company’s Annual
Report & Accounts 2020, agreeing areas that
could be better signposted in the Annual
Report & Accounts 2021.
• Received and considered an Internal Audit
Report presented by the Group’s Director
of Risk & Compliance. The Audit Committee
was also updated on Deloitte’s Cyber Threat
Intelligence System which strengthened
the Group’s Cyber/Information
Security measures.
• Received an update on the Group’s cyber
risk communications programme and on
2021 Code of Conduct training.
• Reviewed the accounting presentation
and judgmental issues, and the viability
assessment report for the year ended
31 December 2021, which included
consideration of compliance with all debt
covenants at all measurement dates out
to 31 December 2024.
• Reviewed and approved the statements
included in the Annual Report & Accounts
2021 concerning internal control, risk
management, including the assessment
of principal risks and emerging risks,
TCFD and the Viability Statement.
• Reviewed, challenged and agreed the
going concern basis to be adopted for the
2021 Accounts.
• Reviewed the Tax Memorandum for the
year ended 31 December 2021.
• Reviewed and accepted KPMG LLP’s Report
to the Audit Committee on the audit of the
Financial Statements for the year ended
31 December 2021.
• Reviewed KPMG LLP’s confirmation of its
objectivity and independence.
• Reviewed and approved the terms of the
management representation letter addressed
to the External Auditor.
• Reviewed BDO LLP’s Independent Limited
Assurance Report on the Scope 1 and 2
(location based) GHG emissions data included
in the Annual Report & Accounts 2021.
• Approved the Audit Committee Report
for going concern to be adopted for the 2021
Interim Results.
• Reviewed the assessment of goodwill at
30 June 2021 agreeing it was no longer
considered to be a significant risk, in line
with KPMG’s assessment.
• Reviewed the Tax Memorandum for the
half-year ended 30 June 2021.
• Reviewed and accepted KPMG LLP’s
Report to the Audit Committee on the
half-year review for the six months ended
30 June 2021.
• Noted the OECD’s Inclusive Framework
Agreement (“BEPS”) relating to a
reformation of international tax rules,
which may become effective in 2023.
• Reviewed and approved the terms of
the management representation letter
addressed to the External Auditor.
• Discussed the Group’s draft Announcement
of the 2021 Interim Results together with the
draft slides for the analysts’ presentation.
• Discussed and approved the external audit
plan and strategy proposed by KPMG LLP
for the 2021 audit, including scope,
significant risks and other areas of audit
focus, the audit cycle and auditor reporting.
• Reviewed and approved the terms of the
letter of engagement addressed to the
External Auditor.
• Received and reviewed KPMG LLP’s
assessment on its objectivity and
independence.
• Discussed KPMG’s Lead Partner rotation
and confirmed agreement with the proposed
successor to the current Lead Partner on the
Senior account.
• Held a private meeting with the External
Auditor, without executive management
being present.
• Held a private meeting with the Director
of Risk & Compliance, without executive
management being present.
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SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
• Reviewed the effectiveness and quality
for 2021.
of the 2020 external audit.
• Noted the Policy for the Provision of
Non-Audit Services by the External Auditor
and the Policy on the Employment of
Former Employees of the Company’s
External Auditor, which had been agreed
earlier in 2021 and no changes were
required to be made.
• Reviewed the draft updated Terms of
Reference of the Audit Committee which
contained one minor amendment.
• Reviewed the output of the AQR review.
• Reviewed the effectiveness of the Group’s risk
management and internal control systems and
disclosures made in the Annual Report &
Accounts 2021.
• Reviewed the draft Annual Report & Accounts
2021 and reviewed the Company’s statement
on the draft Annual Report & Accounts prior
to endorsement by the Board, that, taken as a
whole, the draft Annual Report & Accounts is
fair, balanced and understandable and provides
the information necessary to assess the
Group’s position and performance, business
model and strategy.
• Discussed the Group’s draft Announcement
of the 2021 Final Results together with the
draft slides for the analysts’ presentation.
• Reviewed the Notice of Meeting for the 2022
AGM and the Proxy Form for the 2022 AGM.
• Received and considered a report presented by
the Group’s Head of Risk & Compliance, which
included the proposed 2022 internal audit plan.
• Reviewed and approved the Internal
Audit Charter.
• Assessed the effectiveness of the internal
audit function.
• Held a private meeting with the External
Auditor, and a separate private meeting with
the Group’s Head of Risk & Compliance
without executive management being present.
GOVERNANCE In addition to the three standard scheduled meetings summarised above, additional meetings were held in March 2021, to review documents in
relation to the disposal of Senior Aerospace Connecticut, and in April 2021, to review the draft Q1 2021 Trading Update. The Audit Committee also
discussed and approved the appointment of the Head of Risk & Compliance and reviewed her remuneration.
Audit Committee Attendance and Separate Discussions
The Audit Committee typically invites the non-executive Chair, Group Chief Executive Officer, Group Finance Director, Group Financial Controller, the
Group’s Director of Tax & Strategic Finance, the Group’s Director of Risk & Compliance and, more recently, the Group’s Head of Risk & Compliance
(who, following the retirement of the Director of Risk & Compliance, heads up the internal audit function) and senior representatives of the external
audit firm to attend its meetings, although it reserves the right to request any of these individuals to withdraw from any meeting.
During 2021, the Audit Committee also held separate discussions with the External Auditor, the Director of Risk and Compliance and, more recently,
with the Group’s Head of Risk & Compliance, without executive management being present. In addition, the Chair of the Audit Committee held
separate meetings with each of these during the course of the year.
Significant risks considered by the Audit Committee
The table below summarises the significant risks considered by the Audit Committee, including significant judgments and estimates:
Significant risks considered by the Audit Committee
How the risk was addressed by the Audit Committee
Inventory net realisable value
Inventory held covers a wide range of products in both the Aerospace
and Flexonics Divisions. The ability of the Group to sell this inventory at
a value above its carrying value in the future can be adversely affected
by many factors. Accordingly, there is a risk that inventory is carried at
amounts that exceed net realisable value.
The global pandemic has continued to have an adverse impact on
demand levels in the short term from the OEMs that the Group serves.
In response, certain programmes on which the Group has content have
been cancelled or significantly reduced. This continues to heighten the
exposure to any specific inventory or assets held where there is no
alternate use.
The Audit Committee recognises the risk that the Group may not recover
the full cost of inventory via future sales and may not hold appropriate
provisions against obsolete and slow-moving inventory.
Management included within the continued restructuring focus an
assessment of any actions required to address the exposures on
programmes where the end customer significantly reduced or cancelled
demand. Management presented an analysis of proposed inventory and
asset impairments as well as reversals of previously impaired inventory
and assets. The Audit Committee challenged impairments to ensure
there was no alternative use, or that there was sufficient committed
demand where impairments were reversed and agreed with the
proposals and accompanying disclosures.
Other provisions
Provisions are held where management considers there is an obligation,
payment is probable and the amount payable can be reliably estimated.
Provisions held by the Group include but are not limited to:
• those held against legal claims and contractual matters, restructuring,
product warranties; and
• tax provisions for uncertain risk exposures.
There is a risk that other provisions overstate or understate the
associated liability.
The considerations above were presented to the Audit Committee within
the accounting presentation and judgmental issue paper for the related
reporting period from the Group Financial Controller.
These were further discussed with the External Auditor.
The Audit Committee believes there are no reportable issues arising from
this significant risk.
The Audit Committee considered the basis upon which management had
made its accounting judgments to determine the level of other provisions.
The Audit Committee receives a separate report from the Group Head
of Tax that sets out the various uncertain risk exposures and any related
provisions that are based on the best estimate of the amounts likely
to be payable. The Audit Committee carefully considers the assumptions
applied and provides appropriate challenge including an assessment
of the related sensitivities. These were further discussed with the
External Auditor.
The Audit Committee believes there are no further reportable issues
arising from these significant areas.
Goodwill, which was a significant risk in the Annual Report & Accounts 2020, is no longer considered a significant risk by the Audit Committee
given sufficiency of headroom in the goodwill impairment assessment and no further identified impairment assessment triggering events in 2021
(See Note 13).
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
83
DIRECTORS’ DUTIES CONTINUED
Other judgments and estimates
The Audit Committee considered other areas of focus where judgments and estimates have a significant effect on the amounts recognised in the
Financial Statements. These areas of focus and how they were addressed by the Audit Committee are described below:
Other focus area considered by the Audit Committee
How these were addressed by the Audit Committee
Other key judgments and estimates
These include, but are not limited to, judgments and estimates in areas
not covered by significant risks such as going concern and viability(1),
goodwill impairment assessment, retirement benefits, leases and tax
(excluding provisions for uncertain tax which is a significant risk).
The Audit Committee reviewed the accounting presentation and
judgmental issues paper, including a funding and liquidity report, for the
related reporting period from the Group Financial Controller. In addition,
the Audit Committee received a tax memorandum paper for the related
reporting period from the Group’s Head of Tax.
In its review of these presentation papers, the Audit Committee
challenged management on the critical accounting judgments, and the
key sources of estimation and uncertainty that were taken in the
preparation of the Financial Statements, and concluded that they
were appropriate.
The Audit Committee believes there are no further reportable issues
arising from these other key judgments and estimates.
(1) In 2020, given the impact of the pandemic on macro-economic conditions, going concern and viability was considered a key focus area regarding the challenge of
management’s judgments by the Audit Committee. In 2021, although the review of going and viability will still be included within “other key judgments and estimates”
for consideration by the Audit Committee, it is no longer considered a key focus area given the level of headroom on committed facilities and covenant compliance at
31 December 2021 and positive market signals for future growth.
Presentation of results
The Board presents adjusted key measures of
profit, in addition to reported measures, where
items are significant in size and either they do
not form part of the trading activities of the
Group or their separate presentation enhances
understanding of the underlying financial
performance. The Audit Committee assessed
the presentation to ensure a fair and balanced
treatment of what is and is not included as an
adjusting item.
The Audit Committee considered the
accounting policy applied to exclude adjusted
items by reference to guidance issued by the
FRC and the European Securities and Markets
Authority (“ESMA”), and the need to ensure
any alternative performance measures are
presented with equal prominence to reported
figures and on a consistent basis year-on-year.
The Audit Committee discussed the
presentation of adjusted items with the External
Auditor, and concurs with management’s view
that the presentation of items excluded from
adjusted results provides useful disclosure to
aid the understanding of the performance of
the Group.
Resilience through the pandemic
The finance community across Senior have
continued to demonstrate resilience throughout
the pandemic, and the Audit Committee has
valued the continued focus on maintaining an
effective control environment, addressing
the challenges presented by the globalised
lockdowns and new ways of remote working.
This supported the further strengthening of the
risk management framework, and delivery of the
key elements of the internal audit programme in
2021. Similarly, the external audit progressed as
planned and to the set timescales, with no
changes required to the strategy or scope
approved by the Audit Committee.
External audit
Independence of the External Auditor and
policy on the provision of non-audit services
To fulfil its responsibility regarding the
independence of the External Auditor, the Audit
Committee reviewed:
• a report from the External Auditor describing
the arrangements that had been made to
identify, report and manage any conflicts of
interest and to maintain its independence; and
• the FRC’s Audit Inspection Unit public report
on KPMG LLP.
The Audit Committee’s policy in respect of
services provided by the External Auditor and
its Policy on the Provision of Non-Audit Services
by the External Auditor are as follows:
• The External Auditor is invited to provide
services which, in its position as auditor,
it must or is best placed to undertake. This
includes formalities relating to borrowings,
shareholder and other circulars, various other
regulatory reports and certain work in respect
of larger acquisitions and disposals;
• In December 2020, the Company adopted
a new Policy on the Provision of Non-Audit
Services by the External Auditor, which is
in line with the recommendations set out in
the Financial Reporting Council’s (“FRC”)
Guidance on Audit Committees (2016) and
the requirements of the FRC’s Revised Ethical
Standard (2019) (the “Ethical Standard”).
In line with these recommendations and
requirements, the external audit firm is only
appointed to perform a service when doing
so would be consistent with both the
requirements and the overarching principles
of the Ethical Standard, and when its skills and
experience make it the most suitable supplier.
In addition, the Ethical Standard requires an
assessment of whether it is probable that
an objective, reasonable and informed third
party would conclude independence is not
compromised. The approval of the Audit
84
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
GOVERNANCE Committee must be obtained before the
External Auditor is engaged to provide any
non-audit services and these services are
limited to activities which feature on the
approved Permitted Non-Audit Services list.
The total fees for non-audit services shall be
limited to no more than 70% of the average
of the statutory audit fee for the Company,
of its controlled undertakings and of the
consolidated Financial Statements paid to the
External Auditor in the last three consecutive
financial years;
• Other services may not be provided where
precluded by law, regulation, or Ethical
Standards or where the Audit Committee
believes that it would compromise audit
independence and objectivity; and
• All proposed contracts for permitted services
to be provided by the External Auditor require
the Audit Committee’s approval. Approval for
permitted services below £0.050m has been
delegated by the Audit Committee to its
Chair and below £0.025m to the Group
Finance Director.
In 2021, the level of permitted services
undertaken by KPMG LLP was broadly
unchanged, as set out in the table below.
The Audit Committee considered that it was
beneficial for the Company to retain KPMG LLP
for a small amount of permitted non-audit work
and audit related services, because of the firm’s
knowledge of the Group and our requirements
that the Interim audit to be performed by
the External Auditor. The Audit Committee
continues to closely monitor the nature and
level of such permitted non-audit work.
Fees
2021
2020
£0.05m £0.09m
Interim review
Auditor assessment of tax
incentives in Malaysia
and certification of
expenses in France
£nil
Total audit-related services: £0.06m £0.09m
£nil
Non-audit related services:
£0.01m
£0.1m
Policy on tendering
In order to maintain auditor independence
and comply with FRC, EU guidance and the
provisions of the CMA Order 2014 on audit
tendering, the Group undertook a formal tender
of its external audit during the first half of 2016,
led by the Audit Committee. The appointment
of KPMG LLP as the Group External Auditor for
the financial year commencing 1 January 2017
received approval by shareholders at the
Annual General Meeting held in April 2017.
The Audit Committee reviews annually whether
it is appropriate to put the external audit out to
tender and concluded in 2021 that it was not
appropriate to do so. The Audit Committee
fully evaluates auditor performance and
independence annually but does not favour
mandatory five-year rotation.
Assessment of external audit quality
and effectiveness
The Audit Committee reviewed the
effectiveness of the External Auditor and the
external audit process, including an assessment
of the quality of the audit, at its September
2021 meeting.
In 2021, the effectiveness of the external audit
process was performed by assessing a range
of key areas through a formal questionnaire that
was individually distributed to all the members
of the Audit Committee and all other executive
and non-executive Directors. This framework
required consideration of performance areas
which needed future focus by the External
Auditor, the areas where the External Auditor
was meeting expectations and those where
it was considered to have a special strength.
Senior management received answers and
comments from all questionnaires and
consolidated them into a report. The Audit
Committee used this report to facilitate a
debate at its September 2021 meeting and to
assist in assessing the level of external audit
effectiveness. The Audit Committee discussed:
the calibre of the external audit firm, the
robustness of the external audit process and
degree of challenge to matters of significant
audit risk and areas of management subjectivity,
the degree of professional scepticism applied by
the External Auditor, the quality of delivery
of the audit and the service provided by the
External Auditor, the Audit Partner, the audit
approach and planning, the role of management,
the communication by the Auditor to the Audit
Committee, the provisions of support for the
work of the Audit Committee by the Auditor,
the sharing of insights and adding value by
the Auditor, the audit fee, the Auditor’s
independence and objectivity, and the quality
of formal reporting by the Auditor to the Audit
Committee. Feedback about the effectiveness
of the external audit process from the local
management teams was also considered by
the Audit Committee. The Audit Committee
concluded that the External Auditor had
challenged the thinking of the Company and of
the Audit Committee on a number of significant
issues and had maintained its independence.
In July 2021, the Financial Reporting Council
(FRC) published the 2020/2021 Audit Quality
Inspection Reports (AQIR) for each of the “big
four” audit firms, including KPMG. The Audit
Committee challenged KPMG on the AQIR
findings and reviewed improvement proposals
outlined to the Committee to ensure they
had been addressed appropriately. The Audit
Committee Chair and the Group Finance
Director also had direct discussions with the
KPMG Head of Audit, UK, to discuss the firm’s
quality improvement plans. Following
completion of the assessment process outlined
above, the Audit Committee concluded that
it was satisfied with the effectiveness of the
External Auditor; as a consequence, the Audit
Committee has recommended to the Board that
KPMG LLP be re-appointed as Auditor for 2022.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
85
DIRECTORS’ DUTIES CONTINUED
AQR review of the Senior 2020 audit
by KPMG
During the year, the 2020 audit of Senior plc by
KPMG was reviewed by the FRC’s Audit Quality
Review team (“AQR”).
The AQR highlighted specific areas for
improvement related to how KPMG challenged
and evidenced the audit team’s consideration of
all inputs to the Company’s impairment models
and cash flow forecasts. The Audit Committee
Chair, together with the Chair of the Board and
the two Executive Directors, scheduled a
meeting to examine with KPMG the root cause
analysis and to understand the actions agreed
with the AQR to address the issue raised. The
Audit Committee considered the findings and
the identified improvement observations and are
satisfied that the actions will be implemented by
the External Auditor if similar circumstances
were to be encountered in future audits. The
AQR raised no concerns on the audit challenge
over revenue recognition and the significant
risks referenced in the Audit Committee report.
No changes were required to the accounting
applied, or the disclosures presented in the
Annual Report & Accounts 2020.
Overall, the results of the review raised no
issues about Senior’s financial reporting and
there were no issues identified which cast
doubt on the fundamental quality of Senior’s
external audit and the Committee remains
satisfied with the efficiency and effectiveness
of the audit. KPMG have discussed more
generally the firm’s process for enhancing audit
quality which includes internal quality reviews,
and the Audit Committee Chair and Group
Finance Director had direct discussions with the
KPMG Head of Audit, UK to discuss the firm’s
quality improvement plans. KPMG reported to
the Audit Committee as part of their September
2021 report on these matters, with the Audit
Committee concluding that the findings were
being addressed appropriately.
Specific areas referred to the
External Auditor
In 2021, the Audit Committee asked the
External Auditor to look into specific areas
of inventory net realisable value and other
provisions, given these areas are significant
risks identified in this report on page 83.
Further details on the work performed by the
Auditor on the provision for uncertain tax
positions is disclosed on page 110. The Audit
Committee was satisfied with the results of
KPMG’s results and findings.
Internal audit
The Audit Committee is required to assist the
Board in fulfilling its responsibilities relating to
the effectiveness, resourcing and the plans of
the Group internal audit function, which were
headed by the Director of Risk & Compliance
until 30 October 2021. In preparation for
Michelle Yorke’s retirement from the Group, her
role was restructured and some duties allocated
elsewhere; a Head of Risk & Compliance was
appointed on 1 September 2021. The Internal
Audit Manager, who formally reported to the
Group Director of Risk & Compliance, now
reports to the Head of Risk & Compliance.
In 2021, as set out on pages 48 to 49, the
Group further strengthened its risk management
procedures and these have been reviewed by
the Audit Committee. Risk has been assessed
on a top down and bottom up basis and the
consideration of emerging risks has been
formally added to the process. A risk-based
programme of internal audit has been conducted
in the year. In response to constraints imposed
by the pandemic, the internal audit programme
was delivered remotely in 2021.
Under normal circumstances, the Chair and
non-executive Directors are actively encouraged
to visit the Group’s operating businesses
unaccompanied by executive Directors. This
enables them to meet the local management
teams and employees and also undertake site
tours to review matters including production
methods, health and safety and the status of
internal audit findings. These visits are viewed
by the Audit Committee as making a positive
contribution to the internal control framework.
In 2021, due to the restrictions imposed by
governments in order to deal with the pandemic,
no overseas site visits by the Chair and the
non-executive Directors were possible; a
number of UK site visits were undertaken by
Celia Baxter, in connection with her role as the
Director designated to engage with the Group’s
employees. The Board is keen to resume more
site visits, as soon as practicable.
Conclusion
As a result of its work during the year, the Audit
Committee has concluded that it has acted in
accordance with its Terms of Reference. At its
meeting held on 22 February 2022, the Audit
Committee considered each section of the
Annual Report & Accounts 2021, and the
document as a whole, as proposed by the
Company; it reached a conclusion and advised
the Board that it considered the Annual Report
& Accounts 2021 to be fair, balanced and
understandable and that it provided the
information necessary for shareholders to
assess the Group’s position and performance,
business model and strategy. The Chair of the
Audit Committee will be available at the 2022
AGM to answer any shareholders’ questions
about the work of the Audit Committee, subject
to any Government restrictions on the holding
of such meetings in April 2022.
Approval
This Report was reviewed and approved by the
Audit Committee and signed on its behalf by:
Giles Kerr
Chair of the Audit Committee
25 February 2022
86
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
GOVERNANCE REMUNERATION: CHAIR’S
ANNUAL STATEMENT
Our remuneration policy and practices
seek to incentivise during a critical stage
in our recovery.”
Celia Baxter
Chair of the Remuneration Committee
REMUNERATION REPORT: ANNUAL
STATEMENT FROM THE CHAIR OF
THE REMUNERATION COMMITTEE
Dear Shareholder
I am pleased to present the Report of the
Remuneration Committee for the financial year
ended 31 December 2021. This statement sets
out the work of the Committee during the year
and provides the context for the decisions taken.
Remuneration is linked to our strategy
and operational performance
Senior’s vision is to be a trusted and
collaborative high value-added engineering and
manufacturing company delivering sustainable
growth in operating profit, free cash flow and
shareholder value.
Our Remuneration Policy (“Policy”) and
practices support this vision, with our bonus
plans incentivising earnings growth and free
cash flow, and our long-term plans rewarding
the creation of shareholder value, earnings
growth and return on capital. We regularly
consider the alignment of our performance
metrics with the business strategy. Following
feedback from some of our shareholders we
introduced ROCE as a third measure within our
LTIP for awards granted from 2021 onwards.
This recognises the need to build the business
back to healthy returns and brings consideration
of capital deployment into sharper focus.
Sustainability is a key element of our strategy
and the Board is happy with the ongoing
progress of the Group in this area. Senior was
the first company in its sector to set science-
based greenhouse gas emission reduction
targets and our health and safety performance
is excellent. Although our Policy allows the
Committee to include in the bonus, strategic
measures limited to 25% of the bonus
opportunity, this facility has not been used.
Having carefully considered shareholder
feedback, current market conditions and the
stage of recovery of the business, we believe it
is more important at this stage of our rebuilding
to incentivise the executives on delivering the
core financial performance of EPS and Free
Cash Flow. Part of our thinking is that it is clear
from past and current performance, that our
sector-leading Environmental, Social and
Governance (ESG) metrics and progress has
been achieved without the need to incentivise;
rather it is something driven by our core values.
We have therefore decided once again not to
introduce a strategic metric for incentives related
to sustainability, but we will continue to keep
this matter under review.
Senior’s performance during 2021
As explained in the Chairman’s Statement and
the Group Chief Executive Officer’s Statement,
Senior delivered a robust set of results in what
was another very challenging year. The Group
delivered improved profitability, generated good
free cash flow and maintained sector-leading
sustainability progress while navigating through
the impact of the pandemic on our markets and
customers. Key headlines included:
• the Group’s revenue decreased by 5.5%
(on a constant currency basis);
• adjusted operating profit increased by 110.3%
(on a constant currency basis);
• the Group’s adjusted operating margin
increased by 40 basis points, to 0.9% for the
full year;
• adjusted earnings per share was 0.17 pence;
and
• the Group generated robust free cash flows
of £14.0m.
The restructuring of the Group to meet our
strategy and purpose continued in a focused
manner to provide a solid foundation to support
the Company’s future growth aspirations with
the divestiture of Senior Aerospace Connecticut,
the closure of our small oil and gas operating
business in Malaysia, and the closure of our
Senior Aerospace Bosman business in the
Netherlands following the successful
transfer of product lines to our French
Aerospace businesses.
Consultation with stakeholders
during the year
Consultation with employees regarding
executive remuneration: During the year the
Group HR Director and I once again consulted
with employees by holding a video/telephone
conference with representatives from Senior’s
six UK operating businesses. We reminded
them of the structure of our Board of Directors’
pay and explained the outcome of the AGM
voting on the Remuneration Policy and
Remuneration Report. Further we asked them
which of the benefits received by employees
did they most value. It was agreed that the
retirement benefits were appreciated by most
employees. Finally, we asked whether they
thought that our executive Directors should have
ESG targets linked to their bonus. There were
no strong views voiced on this topic. We will
continue to run these sessions in the coming
year as we are keen to get input from our
employees in this area.
This was the third year of running employee
focus groups. Last year we undertook all of
the meetings by video and we wanted this year
to carry out focus groups face-to-face as the
information we gain is richer. Unfortunately,
we were unable to travel to the US when
we had planned due to travel restrictions. We
have therefore this year focused on the UK
operations. The Group HR Director and I have
undertaken 15 focus groups at four of our UK
locations. There were no questions raised
related to executive pay.
Consultation with shareholders: We
extensively consulted with major shareholders
and the major governance agencies during
2020 on the Remuneration Policy and
subsequently made amendments to our policy
proposals relating to post employment
shareholding requirement and the alignment
of Director’s pension contributions to the
workforce. We also contacted them again
in early 2021 to explain why, despite the
sensitivities, we wished to make a part
payment of the 2020 executive bonus relating
to the attainment of free cash flow targets.
At the 2021 AGM the resolutions relating to
the Remuneration Report and Remuneration
Policy were approved by 74.23% and
74.18% respectively.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
87
REMUNERATION: CHAIR’S ANNUAL STATEMENT CONTINUED
Since then, the Committee has written again
to its largest shareholders and, also to a wider
group of smaller shareholders to further
understand and explore their views. I have
undertaken a number of discussions and will
continue to do so with individual shareholders as
per their request. The Committee acknowledges
the shareholders’ concerns around remuneration
decisions taken in 2020, which the Committee
believes were necessary to retain and
incentivise a strong management team. The
main reason why some shareholders voted
against the Remuneration Report was because
they did not agree with the Committee’s
decision to pay an annual bonus to the executive
Directors. On the Remuneration Policy, there
was a divergence of views. Although we had
stated that any new executive directors’ pension
contributions would be aligned on appointment
to that of the wider UK workforce and that
the incumbent executive Directors’ pension
contributions would be aligned by the start
of 2024, some shareholders felt that the
incumbent executive Directors’ pension
contributions should be aligned by the end
of 2022.
The Committee were grateful for the feedback
that they received and have discussed it at
length with the executive Directors and the
following actions have been agreed:
• Pension Alignment: The executive Directors
have offered and the Committee agreed that
the alignment of their pension contributions
to that available to the UK workforce, will
be brought forward to the end of 2022. In
addition, through employee consultation we
are aware that retirement benefits are highly
valued by our UK employee base and form an
essential part of our employee offering for
attracting and retaining skilled staff. With the
further recovery of the business during 2022
the viability of increasing the pension
contribution rate available to the UK workforce
(currently 10%) will be considered.
• Bonus payments: During 2021, we are
pleased that there has been no need for
any major restructuring programmes and we
have commenced hiring employees as our
orderbooks fill. Although early in 2021, we
furloughed a small number of employees in
the UK, these monies were repaid to the UK
government in Q4 2021. Although we have
not reinstated the payment of dividends this
year, we are expecting payments to re-
commence in 2022. The Committee
continues to review the outcome of the
bonus with regard to the overall stakeholder
experience and has the ability to exercise
discretion if it feels that the formulaic
outcomes do not feel appropriate taken
in the round.
Executive Directors’ remuneration 2021
The basic salaries of the Group Chief Executive
Officer, Group Finance Director, the rest of the
Board and the majority of senior management
across the Company were not increased from
1 January 2021. For the wider workforce, pay
increases were applied to a limited extent in
some businesses to satisfy mandatory wage
increases and to address retention concerns.
In line with the Remuneration Policy, the
executive Directors were eligible for a maximum
bonus equivalent to 125% of basic salary,
payable subject to the satisfaction of
performance targets linked to Adjusted EPS
and Free Cash Flow targets.
For the Annual Bonus Plan, we set Adjusted
EPS and Free Cash Flow targets in January
2021 which were viewed as appropriately
challenging. The proportion of bonus related to
the achievement of EPS targets and Free Cash
Flow targets remained unchanged from 2020
60% and 40% respectively, reflecting the
continued importance of Free Cash Flow to
the business. Following the disposal of Senior
Aerospace Connecticut, which completed
on 22 April 2021, the 2021 bonus targets were
reviewed by the Committee; as the Group
would no longer benefit from that operation’s
net Profit before Tax and net Free Cash Flow for
the remaining 8 months and 1 week of 2021.
The Committee concluded that the original 2021
bonus targets should be adjusted to reflect the
reduction in Adjusted EPS and Free Cash Flow,
as set out on page 102. The revised loss per
share target had arisen due to the sale of a
profitable business which did not fit our future
strategy, and the disposal of which provided
additional liquidity. The Committee considered
that the new targets were not materially easier
or harder to achieve than the original targets.
The Committee retains an overriding discretion
in relation to the amount of bonus it awards not
withstanding any formulaic calculations and
targets. The targets are disclosed in the Annual
Report on Remuneration on page 102.
LTIP awards were granted to both executive
Directors and senior management subject to
the satisfaction of challenging three-year targets
linked to Adjusted EPS growth, relative TSR
and for the first time ROCE to align with our
business strategy and due to the importance
of building the business back to healthy levels
of returns. The LTIP awards were subject to a
two-year holding period on vested awards and
the enhanced malus and clawback conditions.
The LTIP awards to the Group Chief Executive
Officer and the Group Finance Director were at
a level of 150% of basic salary. The Committee
felt that this was appropriate as it further aligned
the executive Directors with shareholders.
We were aware that none of the inflight LTIPs
are likely to vest. We saw this LTIP award as
an important part of maintaining management
stability as we moved into the recovery stage.
The Committee retains the discretion to adjust
the level of vesting if it considers the outcome
to be anomalous or is not reflective of the
underlying performance of the Group over the
period, taking into account the resilience of the
markets in which Senior operates and trends
in the underlying equity markets.
Incentive scheme outcomes for 2021
After the end of the financial year, the
Committee reviewed the extent to which the
targets under the Annual Bonus Plan had been
achieved. In considering the outcome, the
Committee took into account the ongoing
performance of the management team who
continue to strongly:
• drive the recovery
• reshape the structure and strategy of the
business moving forward
• maintain liquidity,
• lead the sector in sustainability progress
and commitments; and
• invest in technology to ensure that the
business and its customers meet carbon
reduction targets.
The Committee decided that the annual bonus
outturn was appropriate taking into
consideration the attainment of continued cash
generation within the business, maintaining the
savings post-restructuring, and further progress
in meeting sustainability targets. Therefore,
the executive Directors’ bonus awards for the
year shall be 100% of the maximum bonus
opportunity (representing 125% of the 2021
base salary), of which one third would be
delivered in shares deferred for three years
and two thirds would be delivered in cash.
Awards made under the LTIP in 2019 were
subject to Adjusted EPS and TSR performance
measured over three years up to the end of
2021. Unfortunately, the Adjusted EPS and the
TSR performance was below threshold and
therefore there was no vesting of this award.
The Committee is satisfied that the above
outcomes were a fair reflection of the
performance of the Company over the relevant
performance periods for the incentive schemes.
The Committee did not have to exercise any
discretion in agreeing the outcome of the
incentive plans.
88
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
GOVERNANCE Implementation of the Policy for 2022
The basic salaries of the Group Chief Executive
Officer and Group Finance Director were
increased by 3.15% and 4.99% respectively
with effect from 1 January 2022, broadly in line
with the increase applied to the wider workforce.
During the Committee’s annual consideration
of how we implement our Policy, in light of
shareholder feedback described previously,
we reconsidered the alignment of the executive
Directors’ pension contributions with that
available to the majority of the UK workforce.
It was agreed that the pension contributions of
the incumbent executive Directors would be
aligned by the end of 2022 rather than the end
of 2023 as per the Remuneration Policy voted
on in the 2021 AGM.
The Committee has an obligation to set
stretching targets which balance shareholder
perspectives with the need to challenge,
engage and incentivise executive and senior
management to deliver the business recovery
and strategy. With this is mind the Committee
has concluded the following:
LTIP 2022:
Performance measures and weighting:
Adjusted EPS, TSR and ROCE metrics will be
retained as the performance measures in the
LTIP and have equal weighting of 33.3%:
33.3%: 33.3%.
Adjusted EPS target has been set to be
stretching and challenging. In our deliberations
we ensured alignment with shareholders by
setting Threshold and Maximum taking into
consideration the conditional proposal that
had been received from LSF XI Investments,
LLC, a company advised by Lone Star Global
Acquisitions, Limited. The target is expressed
as an absolute number to be achieved in 2024
rather than a cumulative growth percentage.
TSR performance will continue to be measured
against the FTSE 350 (excluding companies
in the following sectors: Banks; Financial
Services (other than Closed End Investments);
Life and Non-life Insurance; Oil, Gas & Coal;
Precious Metals & Mining; Industrial Support
Services; and Real Estate Investment Services
and Trusts). The excluded sectors remain
broadly similar to those used in previous years
but have been re-mapped based on current
Industrial Classification Benchmark sectors.
The vesting scale will remain the same as for
awards granted in 2021.
The Company has consistently stated that its
medium-term ROCE target is a minimum of
13.5% pre-tax, post IFRS 16 and this has not
changed. The ROCE targets set for the 2022
LTIP award have been increased from those set
in 2021 to reflect where we are on our recovery.
The targets are set at a stretching level that
takes account of market conditions and the
minimum medium-term target.
The Committee will continue to review annually
the targets for new awards to ensure that
they remain challenging and stretching as the
Company continues to rebuild, as its strategy
is implemented in recovering markets.
Further details of the targets to be set for the
2022 LTIP awards are set out in the Annual
Report on Remuneration on page 107.
Quantum of LTIP awards 2022:
As a matter of best practice, before finalising
the LTIP awards, the Committee considered
the movements in the share price since the
beginning of 2021 financial year. As the share
price had increased over the period, it was felt
appropriate to grant the LTIP awards to the
executive Directors based on the normal
percentage of salary of 150% of basic salary.
Annual bonus plan 2022:
Having considered the priorities for the year
we will be maintaining the same bonus
performance conditions and weightings
as in 2021: Adjusted EPS (60% weighting)
and Free Cash Flow (40% weighting).
The Committee has set targets that are both
stretching and challenging in the current
environment and retains an overriding discretion
in relation to the amount of bonus it awards not
withstanding any formulaic calculations and
targets. We also have malus and clawback
arrangements in place.
At the AGM in April 2022, shareholders will
be asked to vote on the Annual Remuneration
Report. I hope that the decisions the
Committee has taken in respect of 2021
will have your support.
Celia Baxter
Chair of the Remuneration Committee
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
89
2021 REMUNERATION REPORT AT A GLANCE
Overview of our remuneration framework for 2021
Element of remuneration
Key features
Salary and employment benefits
Market competitive to attract and retain high quality executives (including fully expensed car or car allowance,
private medical insurance, life insurance, income protection, and defined contribution retirement benefits
or allowances)
Annual bonus:
Adjusted EPS 60%
Free Cash Flow 40%
Long-Term Incentive Plan:
Adjusted EPS (33.3%)
TSR (33.3%)
Return on Capital Employed (33.3%)
Rewards achievement against annual performance objectives:
• Maximum bonus is 125% of salary
• 1⁄3 of any award is paid in shares, deferred for three years
• Group Chief Executive Officer and Group Finance Director target: 62.5% of salary
Supports the Company’s longer-term strategic aims to create sustainable growth in shareholder value and
to incentivise, motivate and retain senior talent:
• Maximum award is 200% of salary and normal awards are 150% of salary
• 25% vesting at “threshold”
Shareholding requirements
Equivalent to 200% of executive Directors’ salary
Post-employment shareholding requirement applies for a period of two years following cessation, as set out
on page 95
Clawback and malus provisions
Cash Bonus Awards subject to clawback
Share awards (LTIP and unvested deferred shares) subject to clawback, malus and post-employment
shareholding requirement
Performance highlights and incentive outcomes
Annual bonus
Performance condition(1)
Free Cash Flow – full year
Adjusted EPS – full year internal target(2)
Target
Actual
Achieved
(% of
maximum)
£(2.0)m
(1.69)p
£14.0m
0.34p
100%
100%
Bonus award to Group Chief Executive Officer and Group Finance Director: 100% of maximum
(1) The Committee set bonus targets in January 2021, but following the disposal of Senior Aerospace Connecticut, which completed on 22 April 2021, the 2021 bonus targets were
reviewed by the Committee, as the Group would no longer benefit from that operation’s net Profit before Tax and net Free Cash Flow for the remainder of 2021. The Committee
concluded that the original 2021 bonus targets should be adjusted to reflect the reduction in Profit Before Tax and Free Cash Flow; the above table shows the revised targets.
The Committee considered that the new targets were not materially easier or harder to achieve than the original targets. A summary of the original and adjusted performance
measures, weightings and performance achieved is provided in the “Performance against performance targets for annual bonus” section on page 102.
(2) Adjusted EPS is measured on a constant currency basis to reduce the impact of exchange rate movements on bonus outcomes
Long-Term Incentive Plan (2019 award)
Targets (threshold – maximum)
Adjusted EPS (50%)
Total Shareholder Return (50%)
15% – 30% growth over three-year performance
period
TSR ranking: 75th percentile (maximum threshold);
50th percentile (minimum threshold)
Targets for the 2019 Awards were not achieved and therefore the awards shall lapse in full.
Actual
-98.9%
(below threshold)
12th percentile
(below threshold)
90
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
GOVERNANCE Application of Remuneration Policy
The chart below shows how the composition of each of the executive Directors’ packages varies at different levels of performance under the
Remuneration Policy. The assumptions noted for “target” performance in the graph below are provided for illustration purposes only.
This chart is based on the following assumptions:
Threshold
Target
Maximum
Fixed pay
Salary is the 2022 basic salary
The value of Benefits and Pension is taken from the single
total figure of remuneration for 2021
Nil
Nil
Annual
bonus
Long-term
share
awards
62.5% of 2021 basic
salary
125% of 2021 basic
salary
25% vesting under
the LTIP (i.e. 25% of
(150% x 2022 basic
salary)) and set out at
face value, assuming
no share price growth
or dividend.
100% vesting under
the LTIP (i.e. 100%
of (150% x 2022
basic salary)) and
set out at face value,
assuming 50% share
price growth and no
dividend.
3,000
2,500
2,000
s
0
0
0
£
1,500
1,000
692
2,620
38%
1,367
31%
49%
1,239
17%
27%
1,777
38%
841
17%
27%
473
925
30%
49%
500
0
80%
45%
25%
41%
80%
45%
25%
41%
Below
Target
Target Max.
Actual
Below
Target
Target Max.
Actual
Group Chief Executive Officer
Group Finance Director
Salary
Benefits and Pension
Annual Bonus
Long-Term Share Awards
Long-Term Share Price Growth
Changes made in 2021
The revised Remuneration Policy was reviewed and agreed by shareholders at the 2021 AGM. The Pension section of the Remuneration Policy was
changed in 2021 in line with shareholder feedback. The details of the change are outlined in the Annual Statement from the Chair of the Remuneration
Committee on page 88 and in the full Remuneration Policy which for ease of reference is laid out on pages 93 to 95.
About this Report
The Report on Remuneration on pages 98 to 107 is produced in accordance with the 2013 Regulations and the relevant provisions of the Listing Rules
of the Financial Conduct Authority. Parts of the Annual Report on Remuneration are subject to audit, as indicated within this Report.
The rest of the Report covers the following key areas:
• Remuneration Policy:
– How shareholder views are taken into account
– Discretions of the Remuneration Committee
– Policy for non-executive Directors
• Annual Report on Remuneration
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
91
REMUNERATION REPORT: POLICY
This part of the report sets out the Remuneration Policy that was put
to a binding vote of the shareholders at the AGM held on 23 April 2021.
This policy applies for a maximum of three years from the date of approval
and took effect from 1 January 2021. The revised policy was reviewed in
the context of the business strategy and the evolving expectations of our
shareholders and stakeholders, which included pension alignment and
post-employment shareholding provisions.
The policy was approved by shareholders at the AGM by 230,355,445
(74.18%) voting in favour and 80,193,440 (25.82%) voting against; with
22,432,322 votes withheld, being votes that are not recognised as a
vote in law. That policy can be read in full in the 2020 Annual Report at
https://www.seniorplc.com/investors/reports.aspx. The Remuneration
Committee had consulted progressively in the months prior to the 2021
AGM with the Company’s largest shareholders and the major governance
agencies. Following the 2021 AGM, we consulted further with the
Company’s major shareholders and, as required by the UK Corporate
Governance Code 2018, the Company produced an Update Statement
which may be found at https://www.seniorplc.com/~/media/Files/S/
Senior-PLC/documents/update_statement_2021.pdf. Of those
shareholders who chose not to support the Remuneration Policy
resolution, there was a divergence of views. Although we had stated that
any new executive directors’ pension contributions would be aligned on
appointment to that of the wider UK workforce and that the incumbent
executive Directors’ pension contributions would be aligned by the start
of 2024, some shareholders felt that the incumbent executive Directors’
pension contributions should be aligned by the end of 2022.
When developing policies and practices, the Remuneration Committee
regularly considers the approach to remuneration and makes decisions
to ensure it is aligned to the business strategy. We do this by developing
an overall package that reflects the skills and experience of the individuals
and appropriate short and long-term incentive plans. The key performance
metrics for both the bonus plan and the long-term incentive plan are
directly linked to the delivery of the strategy and the creation of
shareholder value. Currently the bonus incentivises free cash flow and
earnings growth; Adjusted EPS, TSR and ROCE are included in the
long-term incentive plan.
Factors considered in reviewing the Policy
The Committee is comfortable that the Policy and its implementation are
fully consistent with the factors set out in Provision 40 of the 2018 UK
Corporate Governance Code (set out below):
• Clarity – The Policy and the way it is implemented is clearly disclosed
in this policy section of the Directors’ Remuneration Report, with full
transparency of all elements of Directors’ remuneration.
• Simplicity – The Policy is simple and straightforward, based on a mix of
fixed and variable pay. The annual bonus and LTIP include performance
conditions which are aligned with Senior’s business strategy.
• Risk – The Committee believes that the performance targets in place
for the incentive schemes provide appropriate rewards for stretching
levels of performance without driving behaviour which is inconsistent
with the Company’s risk profile and values. Potential reward is aligned
with market levels of peer companies and the reputational risk from a
perception of “excessive” pay-outs is limited by the maximum award
levels set out in the Policy and the Committee’s discretion to adjust
formulaic remuneration outcomes.
• Predictability – The Policy includes full details of the individual limits in
place for the incentive schemes as well as “scenario charts” on page
77 which set out potential pay-outs in the event of different levels of
performance, based on a number of reasonable assumptions. Any
discretion exercised by the Committee in implementing the Policy will
be fully disclosed.
• Proportionality – The link between the delivery of strategy, long-term
performance, shareholder return and the remuneration of the executive
Directors is set out in the Remuneration Report.
• Alignment to culture – The approach to Directors’ remuneration is
consistent with the Group’s culture and values.
Summary of Decision-Making Process for Policy Changes
In determining and implementing the Policy, the Committee follows a
robust process which includes discussions on the content of the Policy
at Remuneration Committee meetings. To support this process, the
Committee receives advice from independent advisers. It also considers
representations from other key stakeholders, including shareholders and
executive management (whilst ensuring potential conflicts of interest are
suitably managed), in the context of the evolving corporate governance
landscape. The Committee monitors changes in corporate governance
guidance and regulations to ensure the Policy remains compliant. The
implementation of the Policy takes account of the remuneration of the
wider workforce and is aligned with the Group’s strategy by appropriately
incentivising the executive Directors to deliver the strategic objectives.
92
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
GOVERNANCE Policy for executive Directors
Below is the Policy which was approved by shareholders at the 2021 AGM. Following shareholder feedback after the AGM, the update to the
Policy is highlighted in bold in the table.
Purpose and link to strategy
Operation
Maximum
Performance assessment
Element
Salary
• Reflects the
performance of the
executive Director,
his or her skills and
experience over time
and the responsibilities
of the role
• Provides an appropriate
level of basic fixed pay
avoiding excessive risk
arising from over-
reliance on variable
income
• Will normally be reviewed
annually with effect from
1 January
• Benchmarked periodically
against companies with similar
characteristics and sector
companies
• Normally positioned within a
range around the mid-market
level taking into account the
experience and performance
in the role of the individual,
complexity of the role, market
competitiveness and the
impact of salary increases
on total remuneration
• Other than to reflect change
in the size and complexity
of the role/Company, the
Committee will have
regard to the basic salary
percentage increases taking
place across the Company
more generally when
determining salary increases
for the executive Directors
• No maximum salary cap
Bonus
• Incentivises annual
• Up to 83.3% of salary paid in
• Overall maximum of 125%
delivery of corporate
financial and non-
financial goals
• Delivery of a proportion
of bonus in deferred
shares provides
alignment with
shareholders and
assists with retention
of salary
cash with up to a further 41.7%
of salary paid as a conditional
award of deferred shares
• Maximum bonus only payable
for achieving demanding
targets
• Deferred shares are released
three years after award but
are subject to forfeiture by
a “bad leaver”
• Executives are entitled to
receive the value of dividend
payments that would have
otherwise been paid in respect
of vested deferred shares
• All bonus payments are at the
discretion of the Committee
• Different performance
conditions may be set when
recruiting an executive Director
• The Committee may review
the performance conditions
from time to time
• The Committee has the
discretion in certain
circumstances to grant and/or
settle an award in cash. In
practice, this will only be used
in exceptional circumstances
for executive Directors
• The Committee has the
discretion to adjust bonus
targets or outcomes if deemed
appropriate, where the bonus
outcome feels perverse. In
practice, this will only be used
in exceptional circumstances
for executive Directors
• Individual performance in the
role and Group performance
are among the factors taken
into consideration when
awarding increases
• The Committee determines
appropriate performance
targets and weightings at
the start of each year
• Details of the financial
performance targets will
normally be disclosed in the
following Annual Report on
Remuneration for reasons
of commercial sensitivity
• The Committee may include
non-financial metrics up to
25% of the overall award
• Performance below threshold
results in zero payment.
Payment rises from 0%
to 100% of the maximum
opportunity for levels of
performance between the
threshold and maximum
targets
• Typically, threshold is around
90% of target, and on-target
performance delivers
approximately 50% of the
maximum opportunity
• Subject to clawback at the
Committee’s discretion over
cash bonus outcomes and
unvested deferred shares in
the event of material
misstatement, gross
misconduct, serious
reputational damage or
corporate failure and, if
required, over any unvested
LTIP awards
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
93
REMUNERATION REPORT: POLICY CONTINUED
Element
Purpose and link to strategy
Operation
Maximum
Performance assessment
Long-Term
Incentive Plan
(LTIP)
• Incentivises sustained
performance over the
longer term
• The use of longer-term
performance targets
and delivery of awards
in shares rewards the
achievement of the
Company’s strategic
goals and increases in
shareholder value
• 150% of salary
• 200% of salary in
exceptional circumstances,
such as upon recruitment
• The Committee determines
performance conditions and
weightings at the start of
each year, providing that the
targets are not materially
less challenging
• In respect of each
performance element,
performance below the
threshold target results in
zero vesting. Vesting of each
performance element starts
at the 25% threshold and
rises to 100% for maximum
level of performance
• Subject to clawback at the
Committee’s discretion
during the period of three
years following the date of
vesting in the event of
material misstatement, gross
misconduct, serious
reputational damage or
corporate failure.
• Annual grants of performance
shares which vest subject
to performance measured
over three years and
continued service
• Executives are entitled to
receive the value of dividend
payments that would have
otherwise accrued during the
3-year performance period in
respect of vested LTIP awards
• All awards are subject to the
discretions contained in the
plan rules
• The Committee may review the
performance conditions from
time to time
• The Committee has the
discretion in certain
circumstances to grant and/or
settle an award in cash. In
practice, this will only be used in
exceptional circumstances for
executive Directors
• A two-year post-vesting holding
period applied to LTIP awards
from the March 2018 award,
creating a five-year period
between the grant of the awards
and their final release
• Employees including
• The Sharesave Plan has
• Employees can normally
• N/A
All-
Employee
Share
Schemes
executive Directors are
encouraged to become
shareholders through
the operation of the
Sharesave Plan, the
HMRC-approved
all-employee share plan
Pension
• Provides competitive
retirement benefits for
the Group’s employees
elect for a three-year savings
contract under standard terms
and within HMRC limits
• The option price for Sharesave
awards can be set at a
discount of up to 20% of the
market value of the shares
at the start of the savings
contract, although to date no
awards granted under the
2006 Sharesave Plan have
been set at a discount
• 20% of basic salary either as
a Company contribution to
Senior GFRP or as salary in
lieu of pension
• N/A
• From the end of 2022,
the maximum pension
contribution or pension
allowance for executive
Directors will be the
maximum percentage
pension contribution
available to the majority
of the UK workforce.
standard terms under which
participants can normally enter
a savings contract in return for
which they are granted options
to acquire shares at the market
value of the shares at the start
of the performance period
• The rules for this plan were
first approved by shareholders
at the 2006 AGM and the
updated rules were approved
at the 2016 AGM
• The executive Directors may
participate in the Senior plc
Group Flexible Retirement Plan
(Senior GFRP), a contract-
based, money purchase
pension plan and/or receive
cash allowances
• Bonuses are not included in
calculating retirement benefits
• From 2020, any new executive
directors will receive a pension
contribution in line with that
available to the majority of
employees in the
relevant jurisdiction
• The pension contributions
or pension allowance for
executive Directors will be
aligned with the majority
of the UK workforce by the
end of 2022
94
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
GOVERNANCE Element
Purpose and link to strategy
Operation
Maximum
Performance assessment
• N/A
• The value of benefits is
based on the cost to the
Company and is not
predetermined
• There is no monetary
cap on other benefits
• N/A
• N/A
Other
benefits
• Provides a competitive
package of benefits that
assists with recruitment
and retention
Shareholding
guidelines
• Aligns executive
Directors’ interests
with those of other
shareholders in
the Company
• Benefits include provision of
a fully expensed car or car
allowance, private medical
insurance, life insurance
and income protection,
tax equalisation and
relocation benefits
• Any reasonable business-
related expenses (including tax
thereon) can be reimbursed
• Executive Directors to retain
at least 50% of the shares
that vest under the LTIP and
Deferred Bonus Award, after
allowing for tax liabilities, until
a shareholding equivalent in
value to 200% of base salary
is built up
• Post employment shareholding
requirements will apply, for all
LTIP awards granted from 2021
onwards and any shares that
vest from deferred bonus from
the 2021 bonus scheme
onwards, for a period of two
years following cessation of
employment at the lower of (1)
80% of the in-employment
shareholding guideline in place
prior to cessation and (2) the
actual shareholding held at the
time of cessation.
Recruitment of executive Directors
Salaries for newly appointed executive directors will be set to reflect
their skills and experience, the Company’s intended pay positioning
and the market rate for the role.
Where it is appropriate to offer a below median salary initially, the
Committee will have the discretion to allow phased salary increases
over time for newly appointed directors, even though this may involve
increases in excess of the rate for the wider workforce and inflation.
Benefits will be provided in line with those offered to other employees,
with national or international relocation expenses/arrangements
(e.g. schooling, tax equalisation) provided for if necessary.
The aggregate incentive offered to new recruits will be no higher than
that outlined in the Policy on pages 93 to 95. The Remuneration
Committee has flexibility to grant share awards of up to 200% of salary
upon recruitment. Different performance measures may be set initially
for the annual bonus and LTIP, taking into account the responsibilities
of the individual, and the point in the financial year that they joined.
Current entitlements (benefits, bonus, share schemes) may be bought
out on terms that are no more favourable than a like-for-like basis (with
a comparable time horizon, fair value and subject to performance
conditions). Existing incentive arrangements will be used to the fullest
extent possible, although awards may also be granted outside these
schemes if necessary and as permitted under the Listing Rules. In the
case of an internal hire, any outstanding variable pay awarded in relation
to the previous role will be allowed to pay out according to its terms of
grant (adjusted as relevant to take into account the Board appointment).
Rationale behind performance metrics and targets
The performance-related elements take into account the Company’s risk
policies and systems and are designed to align the Directors’ interests
with those of shareholders. Variable pay elements aim to reward
executive Directors for performance at the highest levels and, as such,
the Committee aims to set targets that are both stretching and achievable.
All targets are set on a sliding scale. The Committee reviews the annual
bonus measures set for all the Company’s senior executives (not only
the executive Directors) every year in order to ensure that they are
aligned with the Company’s strategy and annual goals and to ensure
that bonus arrangements amongst the Company’s senior executive team
are consistent.
The annual bonus may include a mix of financial and non-financial
measures reflecting the key annual priorities of the Group. The financial
metrics currently include two of the Company’s KPIs: Free Cash Flow,
which is a key measure of the business’s ability to fund future
acquisitions; and Adjusted EPS, which will reflect the Group’s ability
to expand into new regions and product markets and increase the
profitability of the existing operations. Adjusted EPS is measured on
a constant currency basis to reduce the impact of exchange rate
movements on bonus outcomes. If non-financial measures are selected,
these may include reference to the Group’s sustainability, safety and
organisational goals.
The Free Cash Flow measure applies to 40% of the total bonus award,
and the Adjusted EPS measure applying to the remaining 60% of the
total bonus, reflecting the importance of both measures to the running
of the Group.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
95
REMUNERATION REPORT: POLICY CONTINUED
The performance measures used in the LTIP awards consist of Adjusted
EPS, TSR and ROCE; with ROCE being added as a third performance
measure for awards granted from 2021 onwards, given its importance in
the M&A evaluation process, capital investment decisions and customer
bid evaluations. In line with the Policy, the Committee retains the ability
to amend performance measures to reflect changes in market conditions
and business strategy.
The targets will be reviewed prior to each grant by taking account
of internal and external expectations. The targets for awards granted
under this Remuneration Policy are set out in the Annual Report
on Remuneration.
Relationship between executive Director and employee pay
The Remuneration Policy for the executive Directors is designed taking
into account the policy for employees across the Group as a whole.
There are some differences in the structure of the Remuneration Policy
for the executive Directors and other senior employees, which the
Remuneration Committee believes are necessary to reflect the different
levels of responsibility of employees across the Company and reflect
different market norms for different roles. The key differences in
remuneration policy between the executive Directors and employees
across the Group are the increased emphasis on performance-related
pay and the inclusion of a share-based long-term incentive plan for
executive Directors.
Executive Directors are provided with a competitive package of benefits
that includes (depending on role) participation in the Group’s occupational
pension arrangements, and/or receipt of pension allowance, provision
of a fully expensed car or car allowance, private medical insurance,
life insurance and income protection.
The majority of senior managers are eligible to participate in annual bonus
arrangements with challenging targets tied to the performance of their
operating business, Division and, for the most senior executives,
the Group’s performance.
Long-term incentives are provided to the most senior executives
and those anticipated as having the greatest potential to influence
performance levels within the Company. A lower aggregate incentive
quantum operates at below executive level, with levels driven by the
impact of the role and market comparatives.
Awards under the Restricted Share Award Plan, a deferred share award
plan without performance conditions, are made to selected individuals
who do not benefit from other long-term incentives but are considered
to have significant potential or are key contributors.
In order to encourage wider employee share ownership, the Company
operates a Sharesave Plan in which employees in the UK, North America
and continental Europe, including executive Directors, may participate.
How employees’ pay is taken into account when setting
executive Director remuneration
The Committee also reviews the salaries of corporate, divisional and
senior operational managers and therefore is fully cognisant of pay levels
in the Group when determining the pay of the executive Directors.
In addition, the Committee’s policy is that salary increases for the
executive Directors and senior executives should not normally be greater
than the general level of increases awarded to other senior managers in
Europe and North America, other than when an executive changes role
or when it is necessary in order to ensure levels of remuneration remain
market competitive.
As laid out in the Chair’s Annual Statement, the Company consulted
with employees in 2021 regarding executive Director remuneration.
Policy on outside appointments
The Remuneration Committee believes that it is beneficial both for the
individual and the Company for an executive Director to take up one
external non-executive appointment. Fees paid for the appointment
may be retained by the executive.
Executive Directors’ service agreements and loss
of office payments
The table below summarises the key provisions of each executive
Director’s contract:
Provision
Detailed terms
Employment
contract dates
Notice period
David Squires – 5 January 2015
Bindi Foyle – 3 May 2017
12 months from both the Company and the
executive Director
Termination payment Contracts may be terminated without notice
by the payment of a sum equal to the sum of
salary due for the unexpired notice period, and
the value of pension contributions and other
benefits such as use of company car, life cover,
income protection and private healthcare
There are no provisions in the agreements, or
otherwise, for additional termination payments
Payments may be made in monthly instalments
and, in these circumstances, there is a
requirement for the Director to mitigate loss
There are no enhanced provisions in relation
to a change of control
Change of control
Copies of the executive Directors’ service contracts are available from the
Group Company Secretary at the Company’s Registered Office during
normal business hours. The Committee’s policy in the event of early
termination of employment is set out below.
96
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
GOVERNANCE Policy on payment for departure from office
On termination of an executive Director’s service contract, the Committee will take into account the departing executive Director’s duty to mitigate
his or her loss when determining the amount of compensation. The Committee’s policy in respect of the treatment of executive Directors leaving
the Group is described below and is designed to support a smooth transition from the Company, taking into account the interests of shareholders:
Component of pay
Base salary,
pension and
benefits
Voluntary resignation or
termination for cause
Paid for the proportion of
the notice period worked
Death, ill health, disability, retirement excluding redundancy
Departure on agreed terms
Paid up to the date of death or leaving, including any untaken
holidays prorated to such date. In the case of ill health, a payment
in lieu of notice may be made and, according to circumstances,
may be subject to mitigation. In such circumstances, some
benefits such as company car or medical insurance may be
retained until the end of the notice period
Annual bonus
cash
Cessation of employment
during a bonus year will
normally result in no cash
bonus being paid
Cessation of employment during a bonus year or after the
year-end but prior to the normal bonus payment date will result in
cash and deferred bonus being paid and prorated for the relevant
portion of the financial year worked and performance achieved
Annual bonus
deferred shares
Unvested deferred share
awards will lapse
LTIP share
awards
Unvested LTIP share
awards will lapse
In the case of the death of an executive Director, all deferred
shares will be transferred to the estate as soon as possible
after death. In all other cases, subject to the discretion of the
Committee, unvested deferred shares will be transferred to the
individual on a date determined by the Committee
Subject to the discretion of the Committee, unvested LTIP share
awards will remain subject to the relevant performance conditions
and normally be measured at the original vesting date.
The awards will normally be prorated for the relevant proportion
of the performance period worked. However, in the case of the
death of an executive Director, the Committee will determine
the extent of vesting within 12 months of the date of death
Options under
Sharesave
As per HMRC regulations As per HMRC regulations
Other
None
Statutory payments and disbursements such as any legal costs
and outplacement fees
Any agreed terms will
normally fall between the
two treatments described
in the previous columns,
subject to the discretion of
the Committee and the terms
of any termination agreement
Notes
a) The Committee will have the authority to settle any legal claims against the Company e.g. for unfair dismissal etc that might arise on termination.
b) There are no enhanced provisions in relation to a change of control.
How shareholder views are taken into account
The Remuneration Committee considers shareholder feedback received
in relation to the AGM each year and guidance from shareholder
representative bodies more generally. In 2020, major shareholders
were consulted on the updating of the Remuneration Policy and its
implementation for the 2021 financial year. Prior to the 2021 AGM
there was further interaction with major shareholders regarding the
Remuneration Policy and Remuneration Report. Following the AGM held
in April 2021, major shareholders were consulted further on the AGM
voting of the Remuneration Policy and Remuneration Report resolutions.
Consultation with shareholders has always been constructive. A further
amendment to the Remuneration Policy regarding pension alignment
was made as a result of the consultation.
Discretions of the Remuneration Committee
The Committee operates the Group’s various incentive plans according to
their respective rules and in accordance with HMRC rules where relevant.
To ensure the efficient administration of these plans, the Committee
may apply certain operational discretions. These include the following:
• selecting the participants for the annual bonus plan and LTIP awards;
• determining the timing of grants and/or payments;
• determining the quantum of grants and/or payments (within the limits
set out in the policy table commencing on page 93);
• adjusting the constituents of the TSR comparator group;
• determining the extent of LTIP vesting based on the assessment
of performance, including the discretion to allow the override of
formulaic outcomes;
• determining “good leaver” status and the extent of vesting in the case
of the LTIP and deferred shares;
• determining the extent of vesting in the case of the LTIP in the event
of a change of control;
• making the appropriate adjustments required in certain circumstances
(e.g. rights issues, corporate restructuring events, variation of capital
and special dividends);
• varying the performance conditions to apply to LTIP awards if an
event occurs which causes the Committee to consider that it would
be appropriate to amend the performance conditions, provided the
Committee considers the varied conditions are fair and reasonable and
not materially less challenging than the original conditions would have
been but for the event in question;
• undertaking the annual review of weighting of performance measures,
and setting targets for the annual bonus plan and LTIP from year
to year;
• adjusting bonus and LTIP targets or outcomes if deemed appropriate,
for example to take account of material M&A activity or other
exceptional circumstances when they arise; and
• adjusting bonus targets or outcomes if deemed appropriate, where
the bonus outcome feels perverse.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
97
REMUNERATION REPORT: ANNUAL REPORT ON REMUNERATION
Policy for non-executive Directors
Element
Purpose and link to strategy Operation
Non-executive
Directors and
Chairman fees
• Takes account of
• The Chair of the Board is paid a single fee for all their
recognised practice
and set at a level that
is sufficient to attract
and retain high calibre
non-executive Directors
responsibilities as determined by the Remuneration Committee.
The non-executive Directors are paid a basic fee. The Senior
Independent Director and the Chairs of the Audit and
Remuneration Committees receive additional fees to reflect
their extra responsibilities
• When reviewing fee levels, account is taken of market
movements in non-executive Director fees, Board Committee
responsibilities, ongoing time commitments and the general
economic environment
• Fee increases, if applicable, are normally effective from
1 January
• The Chair of the Board and non-executive Directors do not
participate in any pension, bonus, share incentive or other share
option plans
• The remuneration of the non-executive Directors is determined
by the Board of Directors. The non-executive Directors do not
participate in any discussion or decisions relating to their own
remuneration
• Any reasonable business-related expenses (including tax
thereon) can be reimbursed
Maximum
Performance
assessment
• N/A
• Other than when
a non-executive
Director changes
role or where
benchmarking
indicates fees
require realignment,
fee increases will
not normally exceed
the general level of
increases for the
Group’s employees
Non-executive Directors’ letters of appointment
The Chair of the Board and non-executive Directors do not have service agreements but the terms of their appointment, including the time
commitment expected, are recorded in letters of appointment. The Chair’s appointment may be terminated on providing 12 months’ notice by either
party. The appointments of the other non-executive Directors may be terminated by the Company or non-executive Director on providing one month’s
notice. Copies of the Chair’s and non-executive Directors’ letters of appointment are available from the Group Company Secretary at the Company’s
Registered Office during normal business hours.
Non-executive Directors’ terms of appointment
Name
Ian King
Celia Baxter
Susan Brennan
Barbara Jeremiah
Giles Kerr
Rajiv Sharma
Mary Waldner
Date original term commenced
Joined the Board November 2017
and became Chairman in April 2018
September 2013
January 2016
January 2022
September 2013
January 2019
December 2021
Date current term
commenced
Expected expiry date of
current term
–
September 2019
January 2022
January 2022
September 2019
January 2022
December 2021
–
September 2022
December 2024(1)
December 2024(2)
September 2022
December 2024(1)
November 2024
(1)
(2)
Rajiv Sharma’s first three-year term of appointment and Susan Brennan’s second three-year term of appointment were both due to expire in December 2021. The terms of
appointment for both Directors have been extended for a further period of three years from the end of December 2021.
Barbara Jeremiah was appointed to the Board with effect from 1 January 2022.
98
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
GOVERNANCE Summary of the Committee’s Terms of Reference
The Terms of Reference of the Remuneration Committee, available in full
on the Company’s website, are summarised below:
• determine and agree with the Board the framework or broad policy
for the remuneration of the Chair of the Board, the executive Directors
and other members of the executive management as it is designated
to consider;
• within the terms of the agreed Policy and in consultation with the
Chair and/or Group Chief Executive Officer, as appropriate, determine
the total individual remuneration package of the Chair, each executive
Director, and other designated senior executives including bonuses,
incentive payments and share options or other share awards;
• approve the design of, and determine targets for, any performance
related pay plans operated by the Company and approve the total
annual payments made under such plans;
• review the design of all share incentive plans for approval by the Board
and shareholders. For any such plans, determine each year whether
awards will be made and, if so, the overall amount of such awards,
the individual awards to executive Directors, and other designated
senior executives and the performance targets to be used;
• determine the policy for, and scope of, pension arrangements for
each executive Director and other designated senior executives;
• ensure that contractual terms on termination, and any payments made,
are fair to the individual and the Company, that failure is not rewarded
and that the duty to mitigate loss is recognised; and
• oversee any major changes in employee benefits structures
throughout the Group.
Members
The Remuneration Committee consists entirely
of non-executive Directors.
Other attendees at Remuneration Committee meetings
The Group Chief Executive Officer and Group HR Director attend
meetings by invitation and the Group Company Secretary acts as
secretary to the Committee but no executive Director or other employee
is present during discussions relating to his or her own remuneration.
Advisers
Before recommending proposals for Board approval, the Remuneration
Committee may seek advice from external remuneration consultants
to ensure that it is fully aware of comparative external remuneration
practice as well as shareholder, legislative and regulatory developments.
The Committee also considers publicly available sources of information
relating to executive remuneration.
All advisers to the Remuneration Committee are appointed and instructed
by the Committee. During the year, the Committee was advised by Korn
Ferry in relation to remuneration advice, LTIP performance monitoring
and the provision of LTIP advice, and by FIT Remuneration Consultants
in relation to the provision of LTIP advice. During 2021, the Company
incurred fees of £13,400 from Korn Ferry and of £4,613 from FIT
Remuneration Consultants, and these costs were based on a combination
of hourly rates and fixed fees for specific items of work. During 2021,
Korn Ferry also supported the Company with the recruitment to the Board
of Barbara Jeremiah as a non-executive Director for which it received a
fee of £25,000.
The Committee does not have a formal policy of subjecting its
remuneration consultants to a regular fixed-term rotation, although the
Committee remains cognisant of the need to seek objective advice
and good value whilst also benefiting from the consultants’ knowledge
of the Company. Other than described above, neither remuneration
consultants have other connections with the Company or its Directors.
The Committee is satisfied that the advice it has received during 2021
has been objective and independent.
Member
Celia Baxter – Chair
Susan Brennan
Giles Kerr
Ian King
Rajiv Sharma
Mary Waldner(2)
Number of
meetings during
term(1)
Number of
meetings
attended
7
7
7
7
7
1
7
6
7
7
6
1
(1)
The full Committee met 7 times in 2021. In addition, authority was delegated to two
members of the Committee, Celia Baxter and Ian King, to hold 3 additional meetings
to confirm the granting and vesting of share awards.
(2) Mary Waldner was appointed to the Board and to the Remuneration Committee on
1 December 2021.
Barbara Jeremiah was appointed to the Board on 1 January 2022 and so
has not been included in the table above.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
99
REMUNERATION REPORT: ANNUAL REPORT ON REMUNERATION CONTINUED
Principal activities and matters addressed during 2021
The Committee has a calendar of standard items within its remit and in addition it held in-depth discussions on specific topics during the year.
The Committee typically meets four times each year, although additional meetings were held in 2021 as the Committee considered issues arising
from the disposal of a business and the AGM voting on the the Remuneration Policy and Remuneration Report resolutions. In addition, authority was
delegated to two members of the Committee, Celia Baxter and Ian King, to hold 3 additional meetings to confirm the grant and vesting of share
awards. The table below shows the standard items considered at each meeting, leading up to the meetings in February and March where the key
decisions regarding performance, outcomes and grants for the coming year are determined.
Standard agenda items
Ad hoc items
January
February
Preliminary review of performance and outcomes under the Annual Bonus and Deferred
Bonus Award.
Preliminary Review of performance and vesting under long-term incentives.
Discuss incentive structure for the financial year including finalisation of targets.
Review of performance and outcomes under the Annual Bonus and Deferred Bonus Award.
Review of performance and vesting under long-term incentives.
Determine incentive structure for the next financial year including finalisation of targets.
Review of draft Remuneration Report.
March (three
meetings)
Approve Remuneration Report.
Confirmation of grants of LTIP, Deferred Bonus Awards and Restricted Share Awards.
Confirmation of vestings of Deferred Bonus Awards and Restricted Share Awards.
May
September
December
(two meetings)
Review and approval of Directors’ and senior managers’ salary and total remuneration
packages for the following financial year taking into consideration available FTSE 250
salary market data.
Performance update on outstanding incentive and bonus awards.
Discussion on 2022 LTIP and bonus targets; and associated shareholder consultation.
Determine remuneration of Chairman.
Review of Committee’s Terms of Reference.
Approve launch of 2021 Sharesave
Review gender pay gap reporting
Review of targets for bonus and LTIP
awards following disposal of Senior
Aerospace Connecticut.
Review of voting on AGM Resolutions
for the Directors’ Remuneration Policy
and the Directors’ Remuneration Report.
Confirm scaling back of 2021
Sharesave grant.
Confirm vesting of Restricted
share awards for leavers following
completion of disposal of Senior
Aerospace Connecticut.
Discuss shareholder feedback from
consultation post-AGM
Approve the AGM Update Statement.
Discuss further shareholder feedback
and actions arising from AGM votes
on Remuneration Policy and Report.
Review feedback from
employee consultation.
Statement of voting at General Meeting
At the AGM held on 23 April 2021, shareholder votes on the Directors’ Remuneration Report and the Remuneration Policy were cast as follows:
Remuneration Report
Remuneration Policy
Voting
Votes
%
Votes
%
For
Against
Total
Withheld(1)
233,840,000
74.23%
230,355,445
74.18%
81,174,762
25.77%
80,193,440
25.82%
315,014,762
100%
310,548,885
100%
17,966,445
N/A
22,432,322
N/A
Reason for vote
against, if known)
Action taken by
Committee
See below
See below
See below
See below
(1) A vote withheld is not a vote in law and is not counted in the calculation of the proportion of votes cast “For” and “Against” a resolution.
The Committee consulted extensively with shareholders prior to the 2021 AGM concerning executive remuneration. Following the AGM, the
Committee wrote again to its larger shareholders and, also to a wider group of smaller shareholders to further understand and explore their views.
A number of discussions have been and will continue to be held with individual shareholders as per their request. The Committee acknowledges the
shareholders’ concerns and sensitivities around remuneration decisions taken in 2020, which the Committee believes were necessary to retain and
incentivise a strong management team. The main reason why shareholders voted against the Remuneration Report was because they did not agree
with the Committee’s decision to pay an annual bonus to the executive Directors for 2020.
On the Remuneration Policy, there was a divergence of views. Although it had already been stated that any new executive directors’ pension
contributions would be aligned on appointment to that of the wider UK workforce and that the incumbent executive Directors’ pension contributions
would be aligned by the start of 2024, some shareholders felt that the incumbent executive Directors’ pension contributions should be aligned by the
end of 2022. Since the AGM, the Committee also agreed that the executive Directors’ pension contributions or allowances would be aligned with the
rates available to the majority of the UK workforce at the end of 2022.
100
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
GOVERNANCE Single total figure of remuneration (Audited information)
The following table shows a single total figure of remuneration in respect of qualifying service for the 2021 financial year for each Director, together
with comparative figures for 2020. Aggregate Directors’ emoluments are shown at the end of the Single Total Figure of Remuneration section.
Salaries and
fees(1)
£000s
Taxable benefits
and allowances(2)
£000s
Bonus(3)
£000s
Long-term
incentives(4)
£000s
Pension benefits
including cash in
lieu of pension
£000s
Total fixed
remuneration
£000s
Total variable
remuneration
£000s
Total
£000s
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2021
2021
2020
540
361
901
191
71
53
62
53
4
434
513
343
856
181
67
50
59
50
–
407
27
22
49
26
21
47
675
451
1,126
270
181
451
1
–
–
–
–
–
1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0
0
0
–
–
–
–
–
–
–
0
0
0
–
–
–
–
–
–
–
108
72
180
108
72
180
–
–
–
–
–
–
–
–
–
–
–
–
–
–
675
455
1,130
192
71
53
62
53
4
435
675
451
1,126
1,350
906
917
617
2,256 1,534
–
–
–
–
–
–
–
192
71
53
62
53
4
435
181
67
50
59
50
–
407
Executives
David Squires
Bindi Foyle
Total remuneration
Non-executives
Ian King (Chairman)
Celia Baxter(6)
Susan Brennan
Giles Kerr
Rajiv Sharma
Mary Waldner(6)
Total remuneration
(1) During 2020, the executive Directors, the Chairman and the non-executive Directors voluntarily reduced their salaries and fees by 20% for a three-month period. Without the
reductions, David Squires’ base salary would have been £540,000 and Bindi Foyle’s base salary would have been £361,000. The fees that the Chairman and the non-executive
Directors would have received, before reductions, are as stated in the table below.
(2) Taxable benefits for executive Directors include the provision of a fully expensed company car or car allowance and private medical insurance. During 2020, David Squires
exchanged his company car for a car allowance. Taxable benefits for non-executive Directors are travel expenses.
(3) Awards under the deferred bonus award, the Enhanced SMIS, in respect of 2021 performance will be granted following the announcement of the 2021 results. The deferred
bonus element that is to be granted in the form of shares to David Squires and Bindi Foyle following the announcement of the 2021 results, is included in the Bonus figure and
will be equivalent in value to one-third of the Bonus figure, namely £225,000 and £150,417 respectively.
(4) The performance conditions attached to David Squires’ and Bindi Foyle’s 2019 LTIP Awards were not achieved, and this award will lapse in March 2022. Further details on the
performance conditions can be found on page 90.
(5) The aggregate amount of remuneration paid to or receivable by Directors in respect of qualifying services as per paragraph 9 of SI 2008/40 Schedule 5 was £2,512,008.
(6) Mary Waldner was appointed to the Board on 1 December 2021 and her 2021 fee is the amount paid from that date. Celia Baxter’s 2020 salaries and fees figure includes the fee
for acting as the Senior Independent non-executive Director from 24 April 2020. Barbara Jeremiah was appointed to the Board on 1 January 2022 and so has not been included
in the table above.
Fees received for outside appointments
The Board supports executive Directors taking up appointments outside the Company to broaden their knowledge and experience. Each executive
Director is permitted to accept one non-executive appointment from which they may retain any fee. Any external appointment must not conflict with
a Director’s commitments to Senior plc.
David Squires does not hold any outside appointments for which he is remunerated. Bindi Foyle was appointed to the Board of Avon Protection plc
as a non-executive director with effect from 1 May 2020 and retained fees of £59,205 for the year ending 31 December 2021 (£29,375 for the year
ended 31 December 2020). Prior to her taking up this appointment, the Nominations Committee considered the time commitment required for this
new role and was supportive of her taking up that appointment.
Annual fees of non-executive Directors
The non-executive Directors do not participate in any pension, bonus, share incentive or other share option plans. Their remuneration reflects both
the time given and the contribution made by them to the Company’s affairs during the year, including membership or chairing of the Board or its
Committees. The remuneration of the non-executive Directors is determined by the Board of Directors. The non-executive Directors do not participate
in any discussion or decisions relating to their own remuneration.
Having considered Senior’s financial performance, the then current market conditions experienced by the Group and its 2021 outlook, and the
significant re-structuring of the business that was then being undertaken, the Board agreed that the salaries and fees paid to the Directors would
not increase in 2021.
Fees
Chairman
Non-executive Director
Chair of Audit Committee
Chair of Remuneration Committee
Senior Independent Director
2021
£
191,000
53,000
9,000
9,000
9,000
2020(1)
£
Percentage
change
191,000
53,000
9,000
9,000
9,000
0%
0%
0%
0%
0%
(1) During 2020, the executive Directors, the Chair of the Board and the non-executive Directors voluntarily reduced their salaries and fees by 20% for a three-month period;
the table above shows the fees that would have been paid had they not been reduced.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
101
REMUNERATION REPORT: ANNUAL REPORT ON REMUNERATION CONTINUED
Senior managers’ emoluments
In addition to setting the remuneration of the executive Directors, the Remuneration Committee oversees the remuneration of other senior managers.
The table below shows the cumulative benefits of the two Divisional CEOs, the two Divisional CFOs and the most senior corporate managers. The
increase in the 2021 Short-term employee benefits compared to the prior year was partly as a result of the senior managers voluntarily reducing their
salaries for a three-month period in 2020 in recognition of the disruption caused by the pandemic; and due to the stronger bonus performance in 2021.
Short-term employee benefits
Post-employment benefits
Share-based payments
Total
2021
Total
£000s
3,169
42
933
4,144
2020
Total
£000s
2,986
89
887
3,962
Performance against performance targets for annual bonus (audited information)
Bonuses are earned by reference to the financial year and paid in March following the end of the financial year. Consistent with recent years, the
bonuses accruing to the executive Directors in respect of 2021 have been determined by Adjusted EPS and Free Cash Flow performance as set out
in the table below.
The Committee set bonus targets in January 2021, but following the disposal of Senior Aerospace Connecticut, which completed on 22 April 2021,
the 2021 bonus targets were reviewed by the Committee in May 2021, as the Group would no longer benefit from that operation’s net Profit before
Tax and net Free Cash Flow for the remaining 8 months and 1 week of 2021. The Committee concluded that the original 2021 bonus targets should be
adjusted to reflect the reduction in Adjusted EPS and Free Cash Flow, as set out on page 88. The revised loss per share target had arisen due to the
sale of a profitable business which did not fit our future strategy, and the disposal of which provided additional liquidity. The Committee considered
that the new targets were not materially easier or harder to achieve than the original targets.
A summary of the adjusted measures, weightings and performance achieved is provided in the table below:
Threshold
Target Maximum
2021
2020
Actual
achieved
Maximum
bonus
achievable
Percentage
of maximum
achieved
Bonus
payable
(% of 2021
salary)(1)
Maximum
bonus
achievable
Percentage
of maximum
achieved
Bonus
payable
(% of 2020
salary)(1)
£(5.0)m £(2.0)m £10.0m £14.0m 50.00%
100%
50%
50.00% 100.00% 50.00%
(2.00)p
(1.69)p
0.02p
0.34p
75.00%
125.00%
100%
100%
75%
0.00% 0.00%
125% 125.00% 40.00% 50.00%
75.00%
Free Cash Flow targets – full year
Adjusted EPS targets(2) – full year
internal target
Totals
(1)
When bonus is payable, this is paid two-thirds in cash and one-third in deferred shares. The deferred share element of the 2020 bonus was awarded on 12 March 2021 based on
a share price of £1.128 and shall ordinarily vest on the third anniversary of the award on 12 March 2024. The deferred element of any 2021 bonus shall be awarded following the
announcement of the 2021 annual results in 2022 and the details disclosed in the 2022 Remuneration Report.
(2) The bonus is calculated with regard to full-year Free Cash Flow, and internal Adjusted EPS targets on a constant currency basis.
(3) The performance measures originally set by the Committee in January 2021 for the 2021 bonus targets, before adjustment due to the disposal of Senior Aerospace Connecticut,
are set out in the table below:
Free Cash Flow targets – full year
Adjusted EPS targets(²) – full year
internal target
Threshold Target
£3.0m
–
Maximum
£15.0m
(1.66)p
(1.32)p
0.39p
Total pension entitlements (audited information)
The 2021 single figure remuneration for pension benefits for David Squires and Bindi Foyle consisted of a cash allowance of £108,000 (2020 –
£108,000) and £72,200 (2020 – £72,200) respectively, this being 20% of the respective base salaries.
The Committee had previously stated that any new executive Directors’ pension contributions would be aligned on appointment to that of the wider
UK workforce and that the incumbent executive Directors’ pension contributions would be aligned by the start of 2024. However, during consultations
with shareholders during 2021, some felt that the incumbent executive Directors’ pension contributions should be aligned by the end of 2022. Since
the 2021 AGM, the Committee agreed that the executive Directors’ pension contributions or allowances would be aligned at the end of 2022 with the
maximum rate available to the majority of the UK workforce.
Further detail may be found on page 88 of the Chair’s Statement and page 94 of the Renumeration Report: Policy section.
102
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
GOVERNANCE
Payments for loss of office (audited information)
There were no payments made in the year for loss of office.
Performance against performance conditions for LTIP vesting
The performance conditions are set out below.
By reference to performance in the financial year (audited information)
Set out below are the performance conditions attached to the 2019 LTIP award. Neither performance condition was achieved and therefore the 2019
LTIP awards shall lapse in full.
Performance condition
Total shareholder return percentile ranking (50% of Award)
Growth in adjusted earnings per share over performance period (50% of Award)
(1) The growth in adjusted earnings per share was calculated after adjusting for the impact of IFRS 16.
Scheme interests awarded during the financial year (audited information)
Target
(25% vesting)
Maximum
(100% vesting)
50th
15%
75th
30%
Percentage
of total award
achieved
0%
0%
Actual
12th
-98.9%(1)
Directors
David Squires(1)
Bindi Foyle(1)
Scheme
LTIP
LTIP
Basis of award
Annual award
Annual award
Face value
£000s
Percentage vesting
at threshold
performance
810
542
25%
25%
Number of
shares
718,085
480,053
Performance period
end date
31 December 2023
31 December 2023
(1) The face value of the awards represented 150% of the executive Directors’ respective 2021 base salaries.
Current position on outstanding LTIP awards (non-audited information)
The following table shows the current position against performance targets for LTIP awards outstanding from 2020 and 2021.
Performance condition
(25% vesting)
(100% vesting)
Actual to date
(25% vesting)
(100% vesting)
Actual to date
Target
Maximum
Target
Maximum
Conditional share awards granted in 2021
Conditional share awards granted in 2020
Total shareholder return ranking
Adjusted EPS performance for
the final Financial Year of the
performance period
Return on Capital Employed(3)
50th percentile
75th percentile 99th percentile
50th percentile
75th percentile
17th percentile
5.67p
9.8%
7.56p
11.0%
0.17p(2)
1.0%
13.5p
16.5p
0.17p(1)
(1) Actual to date figure of 0.17p represents the Adjusted EPS during the first two years of the three-year performance period for the 2020 LTIP award.
(2) Actual to date figure of 0.17p represents the Adjusted EPS during the first year of the three-year performance period for the 2021 LTIP award.
(3) In 2021, the Committee amended the performance conditions for LTIP awards, so that awards are based on three evenly weighted conditions, namely: TSR ranking, Adjusted
EPS performance, and Return on Capital Employed. Actual to date figure of 1.0% represents the Return on Capital Employed during the first year of the three-year performance
period for the 2021 LTIP award.
To ensure a suitably broad peer group, the TSR comparator group applicable to LTIP awards is the FTSE 350 index, excluding sectors with limited
direct relevance to Senior and those exhibiting high volatility. TSR is averaged over three months prior to the start and end of the performance period.
The Committee reviewed the potential impact of the disposal of Senior Aerospace Connecticut on the three performance targets for the 2021 LTIP
awards: Total Shareholder Return; Earnings per Share; and Return on Capital Employed. The Committee concluded that the disposal should have
no material impact on any of the three measures and agreed that the original targets for the 2021 LTIP awards should remain unaltered.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
103
REMUNERATION REPORT: ANNUAL REPORT ON REMUNERATION CONTINUED
Shareholder dilution
Percentage of issued shares
Discretionary
schemes
(maximum 5%)
All schemes
(maximum 10%)
2.76%
2.24%
Shares awarded as % of issued shares
Headroom
3.79%
6.21%
The Company complies with the dilution guidelines contained within The Investment Association Principles of Executive Remuneration.
At 31 December 2021, awards outstanding and shares issued in the previous 10 years under all share plans (the Senior plc 2005 Long-Term Incentive
Plan (the 2005 LTIP), the Senior plc 2014 Long-Term Incentive Plan (the 2014 LTIP), the Restricted Share Award Plan and the 2006 Savings-Related
Share Option Plan (the Sharesave Plan)) amounted to 3.79% of the issued ordinary share capital of the Company. At 31 December 2021, awards
outstanding and shares issued in the previous 10 years under executive (discretionary) plans (the 2005 LTIP and 2014 LTIP) amounted to 2.76% of the
issued ordinary share capital of the Company.
During 2021, all share awards were satisfied using market-purchased shares. The Remuneration Committee monitors the flow rates of the Company’s
share plans, in particular before new share awards are made, to ensure the flow rates remain within the Investment Association dilution guidelines.
Statement of Directors’ shareholding and share interests (audited information)
The Remuneration Committee encourages Directors to own shares in the Company and, in support of this policy, it expects executive Directors
to retain at least 50% of the shares that vest under the LTIP and Enhanced SMIS deferred share awards, after allowing for tax liabilities, until a
shareholding equivalent in value to 200% of base salary is built up. Included within the Directors’ holdings are 290,000 shares and 38,788 shares
that David Squires and Bindi Foyle purchased respectively.
The table below shows how each Director complies with this requirement. Shares are valued using the Company’s closing share price on
31 December 2021 of 147.03p (31 December 2020 – 89.25p). No options under the Sharesave Plan were exercised by the executive Directors during
the year.
Executive Directors
David Squires
Bindi Foyle
Number of shares
required to be held
(equivalent to 200%
of basic salary at
31 December 2021)
Number of shares
held (including
unvested deferred
shares net of tax) at
31 December 2021
734,544
491,056
639,708
288,119
Unvested awards, subject to
performance conditions
Unvested awards, not subject
to performance conditions
Share ownership
requirements met
No – 87.1%
No – 58.7%
LTIP award(1)
Sharesave
1,554,257
1,038,261
4,103
4,103
Total deferred
share award
240,723
160,816
(1) The minimum thresholds were not reached for the two performance conditions attached to David Squires’ and Bindi Foyle’s 2019 LTIP awards over 353,340 shares, and
235,426 shares respectively (included within their respective LTIP award figures above) and therefore these awards shall lapse in full in March 2022.
The interests of Directors have remained unchanged between the date of the review and the date of the signing of the Annual Report and Accounts.
Executive Directors
David Squires
Bindi Foyle
Non-executive Directors
Ian King
Celia Baxter
Susan Brennan
Giles Kerr
Rajiv Sharma
Mary Waldner(2)
Number of shares
owned outright
(including connected
persons) at
1 January 2021
Shares vested
during 2021(1)
Shares retained
from 2021
vested shares
Shares purchased
during 2021
Number of shares
owned outright
(including connected
persons) at
31 December 2021(3)
394,377
129,361
414,297
31,653
5,900
10,000
–
–
62,748
34,738
62,748
34,738
–
–
–
–
–
–
–
–
–
–
–
–
55,000
38,788
100,000
–
–
–
–
–
512,125
202,887
514,297
31,653
5,900
10,000
–
–
(1) In 2021, the following gains were made by David Squires and Bindi Foyle: £73,283 and £40,570 respectively upon the vesting of their Enhanced SMIS deferred awards and
dividend equivalent shares. The gains were calculated by multiplying the number of shares that vested by the average share price secured by all recipients that sold vested
shares on the vesting day of 18 March 2021 of 116.79p.
(2) Mary Waldner was appointed to the Board on 1 December 2021.
(3) Barbara Jeremiah was appointed to the Board on 1 January 2022 and so has not been included in the table above.
104
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
GOVERNANCE
Performance graph
Share price performance
The closing middle market price of the shares at 31 December 2021 was 147.03p (2020 – 89.25p). During 2021, the shares traded in the range
of 89.5p to 181.1p.
Senior plc total shareholder return
The following TSR graph compares the total shareholder return of the Company’s shares against the FTSE All-Share, Aerospace & Defence index,
and the FTSE 250 Index over a ten-year period (where dividends are included gross of tax). This graph allows a comparison to be made against
organisations facing broadly similar economic and market conditions as the Company.
Senior
FTSE250
FTSE All-Share A&D
300
250
200
150
100
50
0
Dec 11
Dec 12
Dec 13
Dec 14
Dec 15
Dec 16
Dec 17
Dec 18
Dec 19
Dec 20
Dec 21
Remuneration of Group Chief Executive Officer
CEO single figure of total remuneration (£000s)
Annual variable element award rates against maximum
opportunity (%)
Long-term incentive vesting rates against maximum
opportunity (%)
2012
2013
2014
2015(1)
1,529
1,726
1,316
1,020
92
65
54
100
100
91.8
14
21
2016
790
31
0
2017
2018(2)
2019
1,009
1,107
1,203
2020
917
2021
1,350
79
0
75
0
58
28
40
0
100
0
(1) During 2015, Mark Rollins retired from the Board on 31 May 2015 and David Squires was appointed a Director on 1 May 2015. The CEO single figure of total remuneration
includes the combined 2015 values for Mark Rollins and David Squires.
(2) The annual variable maximum bonus opportunity increased from 105% to 125% in 2018.
Percentage change in remuneration of Directors
The table below shows how the percentage changes in Directors’ salary, benefits and bonus between 2019 and 2020 and between 2020 and 2021
compare with the percentage change in the average of each of those components of pay for Senior plc employees. During 2020, the executive
Directors, the Chair and the non-executive Directors voluntarily reduced their salaries and fees by 20% for a three-month period in recognition of the
disruption caused by the pandemic. The percentage change of Salary figures in the table below are calculated using the 2020 salaries before the
voluntary reduction in salaries and fees for the Directors and some Senior plc employees. Employees who joined or left in either year have been
excluded to prevent distortion.
Executive Directors
David Squires
Bindi Foyle
Non-executive Directors
Ian King
Celia Baxter
Susan Brennan
Giles Kerr
Rajiv Sharma
Mary Waldner(1)
Senior plc Employees, excluding Directors
2020 vs 2021
2019 vs 2020
Salary
Taxable benefit
and allowances
Bonus
Salary
Taxable benefits
and allowances
Bonus
Percentage
change
Percentage
change
Percentage
change
Percentage
change(1)
Percentage
change(2)
Percentage
change
0%
0%
0%
0%
0%
0%
0%
N/A
3.3%
3.4%
4.8%
–
–
–
–
–
–
2.0%
150.0%
150.0%
–
–
–
–
–
–
158.6%
2.8%
3.1%
3.2%
6.7%
2.9%
2.5%
2.9%
N/A
-2.1%
-16.0%
-0.1%
–
–
–
–
–
N/A
2.6%
-28.6%
-28.4%
–
–
–
–
–
N/A
-30.1%
(1) The Salary Percentage change figure also includes any merit increases awarded to Directors and employees.
(2) The decrease in David Squires’ Taxable benefits and allowances reflects the transition from using a company car in favour of taking a car allowance during 2020. Bindi Foyle’s
Taxable benefits consisted solely of the receipt of private healthcare insurance.
(3) Celia Baxter was appointed the Senior Independent Director on 24 April 2019 and her fee was adjusted accordingly.
(4) Mary Walder was appointed to the Board on 1 December 2021.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
105
REMUNERATION REPORT: ANNUAL REPORT ON REMUNERATION CONTINUED
CEO Pay Ratio narrative
The CEO Pay Ratio is calculated using Option B, by taking the gender pay gap data (based on Senior’s largest UK employer, Senior UK Limited) and
adding the data for Senior’s two additional UK employing entities. For the purpose of making a valid comparison, furloughed employees and leavers
were excluded. Using the same principles as the gender pay data, the best equivalents were identified, namely: the 25th, 50th and 75th percentile.
The full-time equivalents pay and benefits figures for the year ending December 2021 were calculated, and then reviewed to ensure that the selected
best equivalents were reasonably representative. Factors that contributed to the change in the CEO Pay Ratio from 2020 to 2021 included the Group
Chief Executive Officer’s temporary salary reduction during 2020, and the number of shopfloor employees who were excluded from the data due
to furlough.
Year
2021
2020(2)
2019
Pay ratio
Method(1) 25th percentile
50th percentile
75th percentile
B
B
B
53 : 1
25 : 1
53 : 1
49 : 1
20 : 1
39 : 1
33 : 1
16 : 1
32 : 1
(1) Method B was selected as the most appropriate basis for selecting the 25th percentile, median and 75th percentile pay ratios because the Gender Pay Gap data was more
readily available.
(2) The pay ratios in 2020 had been impacted by the pandemic leading to significant numbers of employees being on furlough and/or made redundant, as well as reduced total
remuneration for the CEO.
Year 2021
Base salary
Total
25th percentile 50th percentile
75th percentile
£18,471
£25,614
£ 25,944
£ 27,797
£ 34,254
£41,397
Relative importance of spend on pay
The following table sets out the percentage change in profit, dividends and overall spend on pay in the financial year ended 31 December 2021
compared with the financial year ended 31 December 2020.
Employee remuneration costs (excluding social security)(1)
Adjusted (loss)/ profit before tax(2)
Dividends paid
2021
£m
198.9
(1.9)
–
2020
£m
225.6
(6.2)
–
Percentage
change
-11.8%
N/A
0%
(1) The 2021 Employee Remuneration costs include those incurred by Senior Aerospace Connecticut during the period until its disposal in April 2021.
(2) The loss before tax in 2021 reduced by 69.4% compared to the loss before tax in 2020.
2022 Remuneration (non-audited information)
Salaries and fees for 2022
Executive Directors
David Squires
Bindi Foyle
Non-executive Directors(1)
Chairman
Non-executive Directors
Chair of Audit Committee
Chair of Remuneration Committee
Senior Independent Director
2022
£
2021
£
Percentage
change
557,000
379,000
197,000
54,500
9,000
9,000
9,000
540,000
361,000
191,000
53,000
9,000
9,000
9,000
3.15%
4.99%
3.14%
2.83%
0.0%
0.0%
0.0%
(1) No additional fees are payable for Committee membership.
Weighting of annual bonus KPIs for 2022
The individual weightings of the KPIs for the executive Directors for the annual bonus are set out below. The maximum bonus opportunity is 125%
of basic salary, with two-thirds payable in cash and one-third in deferred shares.
Free Cash Flow target – full year
Adjusted EPS target – full year internal target
Totals
2022
2021
Maximum possible
cash award
Maximum share
award
33.33%
50.00%
83.3%
16.67%
25.00%
41.7%
Maximum
possible cash
award
Maximum share
award
33.3%
50.0%
83.3%
16.67%
25.0%
41.7%
The actual targets are currently considered commercially sensitive because of the information that this provides to the Company’s competitors.
Full disclosure of the 2022 targets will be disclosed in the 2022 Annual Report.
106
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
GOVERNANCE LTIP Awards for 2022
Adjusted EPS, TSR and ROCE metrics will be retained as the performance measures in the LTIP and have equal weighting of 33.3%: 33.3%: 33.3%.
Adjusted EPS target has been set to be stretching and challenging. The target is expressed as an absolute number to be achieved in 2024 rather than
a cumulative growth percentage.
TSR performance will continue to be measured against the FTSE 350 (excluding companies in the following sectors: Banks; Financial Services (other
than Closed End Investments); Life and Non-life Insurance; Oil, Gas & Coal; Precious Metals & Mining; Industrial Support Services; and Real Estate
Investment Services and Trusts). The excluded sectors remain broadly similar to those used in previous years but have been re-mapped based on
current Industrial Classification Benchmark sectors. The vesting scale will remain the same as for awards granted in 2020.
The Company has consistently stated that its medium-term ROCE target is a minimum of 13.5% pre-tax, post IFRS 16 and this has not changed.
The ROCE targets set for the 2022 LTIP award have been increased from those set in 2021 to reflect where we are on our recovery. The targets are
set at a stretching level that takes account of market conditions and the minimum medium-term target.
The Thresholds and Maximum for 2021 and 2022 are set out in the table below:
Return on Capital Employed
Total Shareholder Return ranking
Adjusted earnings per share
2022
2021
Weighting
(%)
33.33%
33.33%
33.33%
Threshold
(25% vesting)
Maximum
(100% vesting)
Weighting
Threshold
(%)
(25% vesting)
Maximum
(100% vesting)
10.0%
Median
or higher
10.05p
13.5%
Upper quartile or
higher
12.35p
33.33%
33.33%
33.33%
9.8%
Median
or higher
5.67p
11.0%
Upper quartile
or higher
7.56p
Approval of the Directors’ Remuneration Report
The Directors’ Remuneration Report was approved by the Board on 25 February 2022.
Signed on behalf of the Board
Celia Baxter
Chair of the Remuneration Committee
25 February 2022
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
107
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
IN RESPECT OF THE ANNUAL REPORT AND
THE FINANCIAL STATEMENTS
We consider the Annual Report and Accounts,
taken as a whole, is fair, balanced and
understandable and provides the information
necessary for shareholders to assess the
Group’s position and performance, business
model and strategy.
David Squires
Group Chief Executive Officer
25 February 2022
Bindi Foyle
Group Finance Director
25 February 2022
The Directors are responsible for preparing
the Annual Report and the Group and Parent
Company Financial Statements in accordance
with applicable law and regulations.
Company law requires the Directors to
prepare Group and Parent Company Financial
Statements for each financial year. Under that
law they are required to prepare the Group
Financial Statements in accordance with
UK-adopted international accounting standards
and applicable law and have elected to prepare
the Parent Company Financial Statements in
accordance with UK accounting standards and
applicable law, including FRS 101 Reduced
Disclosure Framework.
Under Company law the Directors must not
approve the Financial Statements unless they
are satisfied that they give a true and fair view
of the state of affairs of the Group and Parent
Company and of the Group’s profit or loss for
that period. In preparing each of the Group
and Parent Company Financial Statements,
the Directors are required to:
• select suitable accounting policies and then
apply them consistently;
• make judgements and estimates that are
reasonable, relevant, reliable and prudent;
• for the Group Financial Statements, state
whether they have been prepared in
accordance with UK-adopted international
accounting standards;
• for the Parent Company Financial Statements,
state whether applicable UK accounting
standards have been followed, subject to any
material departures disclosed and explained
in the Parent Company Financial Statements;
• assess the Group and Parent Company’s
ability to continue as a going concern,
disclosing, as applicable, matters related to
going concern; and
• use the going concern basis of accounting
unless they either intend to liquidate the
Group or the Parent Company or to cease
operations, or have no realistic alternative but
to do so.
The Directors are responsible for keeping
adequate accounting records that are sufficient
to show and explain the Parent Company’s
transactions and disclose with reasonable
accuracy at any time the financial position of
the Parent Company and enable them to ensure
that its Financial Statements comply with the
Companies Act 2006. They are responsible
for such internal control as they determine
is necessary to enable the preparation of
Financial Statements that are free from material
misstatement, whether due to fraud or error,
and have general responsibility for taking such
steps as are reasonably open to them to
safeguard the assets of the Group and to
prevent and detect fraud and other irregularities.
Under applicable law and regulations, the
Directors are also responsible for preparing a
Strategic Report, Directors’ Report, Directors’
Remuneration Report and Corporate
Governance Statement that complies with
that law and those regulations.
The Directors are responsible for the
maintenance and integrity of the corporate and
financial information included on the Company’s
website. Legislation in the UK governing the
preparation and dissemination of Financial
Statements may differ from legislation in
other jurisdictions.
Responsibility statement of the Directors
in respect of the annual financial report
We confirm that to the best of our knowledge:
• the Financial Statements, prepared in
accordance with the applicable set of
accounting standards, give a true and fair
view of the assets, liabilities, financial position
and profit or loss of the Company and the
undertakings included in the consolidation
taken as a whole; and
• the Strategic Report includes a fair review
of the development and performance of the
business and the position of the issuer and
the undertakings included in the consolidation
taken as a whole, together with a description
of the principal risks and uncertainties that
they face.
108
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
GOVERNANCE
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF SENIOR PLC
Basis for opinion
We conducted our audit in accordance with
International Standards on Auditing (UK) (“ISAs
(UK)”) and applicable law. Our responsibilities
are described below. We believe that the audit
evidence we have obtained is a sufficient and
appropriate basis for our opinion. Our audit
opinion is consistent with our report to the
audit committee.
We were first appointed as auditor by the
shareholders on 21 April 2017. The period
of total uninterrupted engagement is for the
five financial years ended 31 December 2021.
We have fulfilled our ethical responsibilities
under, and we remain independent of the
Group in accordance with, UK ethical
requirements including the FRC Ethical
Standard as applied to listed public interest
entities. No non-audit services prohibited
by that standard were provided.
Overview
Materiality:
group financial
statements as
a whole
£3.2m (2020: £2.2m)
0.5% of Group revenue
(2020: 5% of normalised
Group profit before tax)
Coverage
• 89% (2020: 87%) of Total losses/profit
before tax
• 72% (2020: 76%) of Group revenue
• 82% (2020: 84%) of Group total assets
Key audit matters
Recurring risks
vs 2020
• Provision for
uncertain tax
positions
• Recoverability
of the Parent
Company’s
investment in
its subsidiary
1. Our opinion is unmodified
We have audited the Financial Statements
of Seniorplc (“the Company”) for the year
ended 31 December 2021 which comprise
the Consolidated Income Statement, the
Consolidated Statement of Comprehensive
Income, Consolidated and Company Balance
Sheet, Consolidated and Company Statement
of Changes in Equity, Consolidated Cash Flow
Statement and the related notes, including
the accounting policies in Note 2.
In our opinion:
• the Financial Statements give a true and
fairview of the state of the Group’s and of the
parent Company’s affairs as at 31 December
2021 and of the Group’s profit for the year
then ended;
• the Group Financial Statements have
been properly prepared in accordance
with UK-adopted international
accounting standards;
• the parent Company Financial Statements
have been properly prepared in accordance
with UK accounting standards, including FRS
101 Reduced Disclosure Framework; and
• the Financial Statements have been prepared
in accordance with the requirements of the
Companies Act 2006.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
109
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF SENIOR PLC CONTINUED
2. Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the Financial Statements and include
the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest
effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. We summarise below
the key audit matters, in decreasing order of audit significance, in arriving at our audit opinion above, together with our key audit procedures to address
those matters and, as required for public interest entities, our results from those procedures. These matters were addressed, and our results are based
on procedures undertaken, in the context of, and solely for the purpose of, our audit of the Financial Statements as a whole, and in forming our opinion
thereon, and consequently are incidental to that opinion, and we do not provide a separate opinion on these matters.
Provision for uncertain tax positions
The Group recorded a provision for
uncertain tax position totalling £16.7m
as at 31 December 2021 (2020: £19.5m)
Refer to the Audit Committee Report in
the Governance section on pages 80 to 86,
Note 2 (significant accounting policies)
and Note 21 (tax balance sheet).
Recoverability of the Parent Company’s
investment in its subsidiary
The parent Company recorded an
investment carrying value of £259.9m as
at 31 December 2021 (2020: £259.9m).
Refer to Note 36 (accounting policies)
and Note 38 (financial disclosures) and
the Parent Company Balance Sheet
The risk
Subjective estimate
The Group operates in a number of different
tax jurisdictions and judgment is required to
determine tax provisions across the Group,
principally in the US.
Determination of provisions for tax
uncertainties is subject to judgment in
assessing the probable outflow of taxes that
will be borne by the entity relating to matters
where the relevant tax authority’s final
assessment of the tax treatment is uncertain.
The tax risk provisions held in connection
with transfer pricing, including inter-company
royalty charges, is a key risk due to its size
and the subjective nature of the arm’s length
basis to which the pricing should adhere to.
The effect of these matters is that, as part of
our risk assessment, we determined that the
provision for uncertain tax positions has a
high degree of estimation uncertainty, with
a potential range of reasonable outcomes
greater than our materiality for the Financial
Statements as a whole. The Financial
Statements (Note 21) disclose the range
estimated by the Group.
Low risk, high value:
The carrying amount of the Parent
Company’s investment in its subsidiary
represents 61% of its total assets. Its
recoverability is not at a high risk of
significant misstatement or subject to
significant judgment. However, due to its
materiality in the context of the Parent
Company Financial Statements, this is
considered to be the area that had the
greatest effect on our overall Parent
Company audit
Our response
Our procedures included:
• Our tax expertise: We have used our own tax
specialists to assess the Group’s tax positions,
the Company’s correspondence with the relevant
tax authorities, and to analyse and challenge the
assumptions used to determine provisions for tax
uncertainties. This is based on our knowledge
and experiences of the application of the tax
legislation, and our understanding of the
production activities at the sites where royalty
charges are applied. We challenged the Directors
on the adequacy of the Group’s provision for
transfer pricing risks particularly arising in the US.
• Assessing transparency: We assessed the
adequacy of the Group’s disclosures in respect
of tax and uncertain tax positions.
We performed the tests above rather than seeking
to rely on any of the Group’s controls because the
nature of the balance is such that we would expect
to obtain audit evidence primarily through the
detailed procedures described.
Our results
• We found the level of provisions for
tax uncertainties to be acceptable.
(2020 result –acceptable.)
Our procedures included:
• Tests of detail: We compared the carrying
amount of the investment with the relevant
subsidiary’s draft statutory balance sheet to
identify whether its net assets, being an
approximation of its minimum recoverable
amount, was in excess of its carrying amount
and assessed whether the subsidiary has
historically been profit-making; and
We performed the tests above rather than seeking
to rely on any of the Group’s controls because the
nature of the balance is such that we would expect
to obtain audit evidence primarily through the
detailed procedures described.
Our results:
• We found the company’s conclusion that there
is no impairment of its investment in it subsidiary
to be acceptable. (2020 result –acceptable.)
We continue to perform procedures over going concern and impairment of goodwill. However, the level of audit risk, and the associated audit effort
required, was significantly reduced in 2021 due in part to the recovery of the Group’s end markets. We also continue to perform procedures over
restructuring costs excluded from adjusted profit, however the nature and quantum has significantly reduced in 2021, reducing the audit effort
required. Accordingly these matters are not assessed as the most significant risks in our current year audit. Therefore, these are not separately
identified in our report this year.
110
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
GOVERNANCE 3. Our application of materiality and an
overview of the scope of our audit
Materiality for the Group financial statements as a
whole was set at £3.2m (2020: £2.2m), determined
with reference to a benchmark of Group revenue of
£658.7m, of which it represents 0.5%. Materiality for
2020 was set at £2.2m, determined with reference to
a benchmark of normalised Group profit before tax
(PBT) of £44.1m, of which it represents 5%.
We consider total revenue to be the most appropriate
benchmark in 2021 as it provides a more stable
measure year on year than group profit before
tax given the ongoing impact of the pandemic
which has distorted the reported profits from the
historical profile.
In 2020 we normalised PBT by adding back
adjustments that do not represent the normal,
continuing operations of the Group and by averaging
over 5 years. In 2020 the items we adjusted for were
impairment and write-off charges against goodwill of
£134.3m, disposal costs of £4.6m and restructuring
of £39.0m.
Materiality for the parent Company financial
statements as a whole was set at £2.9m (2020: £2m),
by reference to component materiality. This is lower
than the materiality we would otherwise have
determined by reference to total Company assets
and represents 0.7% of the Company’s total assets
(2020: 0.5%).
In line with our audit methodology, our procedures
on individual account balances and disclosures
were performed to a lower threshold, performance
materiality, so as to reduce to an acceptable level the
risk that individually immaterial misstatements in
individual account balances add up to a material
amount across the financial statements as a whole.
Performance materiality was set at 75% (2020: 75%)
of materiality for the financial statements as a whole,
which equates to £2.4m (2020: £1.65m) for the Group
and £2.2m (2020: £1.5m) for the parent Company.
We applied this percentage in our determination of
performance materiality because we did not identify
any factors indicating an elevated level of risk.
We agreed to report to the Audit Committee any
corrected or uncorrected identified misstatements
exceeding £160,000 (2020: £110,000), in addition
to other identified misstatements that warranted
reporting on qualitative grounds
Of the Group’s 30 (2020: 31) reporting components
(excluding the Parent Company), we subjected 14
(2020: 17) to full scope audits for group purposes.
The components within the scope of our work
accounted for the percentages illustrated opposite.
Group revenue
£658.7m (2020:Normalised
group profit before tax £44.1m)
Group materiality
£3.2m (2020: £2.2m)
£3.2m
Whole financial statements
materiality (2020: £2.2m)
£2.4m
Whole financial statements
performance materiality
(2020: £1.65m)
£1.76m
Range of materiality at 14
components (£0.4m – £1.76m)
(2020: £0.1m – £0.8m)
£0.16m
Misstatements reported to the
audit committee (2020: £0.11m)
Revenue
Group materiality
Group revenue
Total profits and losses that
made up Group profit before tax
28%
24%
72%
(2020 – 76%)
76%
72%
Group total assets
18%
16%
82%
(2020 – 84%)
84%
82%
11%
13%
89%
(2020 – 87%)
87%
89%
Full scope for group audit purposes 2021
Full scope for group audit purposes 2020
Residual components 2021
Residual components 2020
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
111
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF SENIOR PLC CONTINUED
3. Our application of materiality and an
overview of the scope of our audit
continued
The remaining 28% (2020: 24%) of total Group
revenue, 11% (2020: 13%) of total profits and
losses that made up Group profit before tax
and 18% (2020: 16%) of total Group assets
is represented by 16 (2020: 14) of reporting
components, none of which individually
represented more than 5% (2020: 5%) of any of
total Group revenue, total profits and losses that
made up Group profit before tax or total Group
assets. For these components, we performed
analysis at an aggregated group level to
re-examine our assessment that there were
no significant risks of material misstatement
within these.
The Group team instructed component auditors
as to the significant areas to be covered,
including the relevant risks detailed above and
the information to be reported back. The Group
team approved the component materialities,
which ranged from £0.4m to £1.76m (2020:
£0.1m to £0.8m), having regard to the mix
of size and risk profile of the Group across
the components. The work on 9 of the 14
components (2020: 10 of the 17 components)
was performed by component auditors and the
rest, including the audit of the parent Company,
was performed by the Group team. The Group
team performed procedures on the items
excluded from adjusted Group profit before tax.
The scope of the audit work performed was
fully substantive as we did not rely upon the
Group’s internal control over financial reporting.
Telephone conference meetings and virtual site
visits were held with component auditors
throughout the audit. At these virtual meetings,
the findings reported to the Group audit team
were discussed in more detail, and any further
work required by the Group audit team was
then performed by the component auditor.
4. The impact of climate change
on our audit
We have considered the potential impacts of
climate change on the financial statements as
part of planning our audit.
Climate change impacts the Group in a variety of
ways including the impact of climate risk on the
substitution of existing products and services
with lower emissions options, potential
reputational risk associated with the Group’s
delivery of its climate related initiatives, and
greater emphasis on climate related narrative
and disclosure in the annual report.
As part of our audit we have made enquiries
of management to understand the extent of
the potential impact of climate change risk on
the Group’s financial statements. We have
performed a risk assessment of how the impact
of climate change may affect the financial
statements and our audit. We held discussions
with our own climate change professionals to
challenge our risk assessment. Our assessment
is that the climate related risks to the Group’s
business, strategy and financial planning did
not have a significant impact on our key audit
matters based on the Group’s end markets.
We have read the Group’s and the Parent
Company’s disclosure of climate related
information in the front half of the annual report
as set out on pages 18 to 23, and considered
consistency with the financial statements and
our audit knowledge.
5. Going concern
The directors have prepared the financial
statements on the going concern basis as they
do not intend to liquidate the Group or the
Company or to cease their operations, and as
they have concluded that the Group’s and the
Company’s financial position means that this is
realistic. They have also concluded that there are
no material uncertainties that could have cast
significant doubt over their ability to continue
as a going concern for at least a year from the
date of approval of the financial statements
(“the going concern period”).
We used our knowledge of the Group, its
industry, and the general economic environment
to identify the inherent risks to its business
model and analysed how those risks might
affect the Group’s and Company’s financial
resources or ability to continue operations over
the going concern period. The risks that we
considered most likely to adversely affect the
Group’s and Company’s available financial
resources and/or metrics relevant to debt
covenants over this period were:
• The uncertainty of the impact of COVID 19,
with future range of possible effects such as
further waves of global infections currently
unknown, given the rapidly evolving nature;
and
• The ability of the group to respond and adapt
to structural changes in the industry as a
result of COVID-19.
We considered whether these risks could
plausibly affect the liquidity or covenant
compliance in the going concern period by
comparing severe, but plausible downside
scenarios that could arise from these risks
individually and collectively against the level
of available financial resources and covenants
indicated by the Group’s financial forecasts.
We considered whether the going concern
disclosure in Note 2 to the financial statements
gives a full and accurate description of the
Directors’ assessment of going concern,
including the identified risks and dependencies.
We assessed the completeness of the going
concern disclosure.
Our conclusions based on this work:
• we consider that the Directors’ use of the
going concern basis of accounting in the
preparation of the financial statements is
appropriate;
• we have not identified, and concur with the
Directors’ assessment that there is not, a
material uncertainty related to events or
conditions that, individually or collectively,
may cast significant doubt on the Group’s
or Company’s ability to continue as a going
concern for the going concern period;
• we have nothing material to add or draw
attention to in relation to the Directors’
statement in Note 2 to the financial
statements on the use of the going concern
basis of accounting with no material
uncertainties that may cast significant doubt
over the Group and Company’s use of that
basis for the going concern period, and we
found the going concern disclosure in Note 2
to be acceptable; and
• the related statement under the Listing Rules
set out on page 64 is materially consistent
with the financial statements and our
audit knowledge.
However, as we cannot predict all future events
or conditions and as subsequent events may
result in outcomes that are inconsistent with
judgements that were reasonable at the time
they were made, the above conclusions are
not a guarantee that the Group or the Company
will continue in operation.
112
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
GOVERNANCE 6. Fraud and breaches of laws and
regulations – ability to detect
Identifying and responding to risks of
material misstatement due to fraud
To identify risks of material misstatement due
to fraud (“fraud risks”) we assessed events
or conditions that could indicate an incentive
or pressure to commit fraud or provide an
opportunity to commit fraud. Our risk
assessment procedures included:
• Enquiring of Directors, the audit committee,
internal audit and inspection of policy
documentation as to the Group’s high-level
policies and procedures to prevent and detect
fraud, including the internal audit function,
and the Group’s channel for “whistleblowing”,
as well as whether they have knowledge
of any actual, suspected or alleged fraud.
• Reading Board and audit committee minutes.
• Considering remuneration incentive schemes
and performance targets for management
and Directors including the long-term
incentive plan for Management remuneration.
• Using analytical procedures to identify any
unusual or unexpected relationships.
We communicated identified fraud risks
throughout the audit team and remained alert
to any indications of fraud throughout the audit.
This included communication from the Group
audit team to full scope component audit teams
of relevant fraud risks identified at the Group
level and request to full scope component audit
teams to report to the Group audit team any
instances of fraud that could give rise to a
material misstatement at the Group level.
As required by auditing standards, and taking
into account possible pressures to meet profit
targets and market consensus, we perform
procedures to address the risk of management
override of controls and the risk of fraudulent
revenue recognition. In particular the risk that
revenue is recorded in the wrong period and the
risk that Group and component Management
may be in a position to make inappropriate
accounting entries, and the risk of bias in
accounting estimates and judgements such
as provisions for uncertain tax provisions and
pension assumptions.
We did not identify any additional fraud risks.
We also performed procedures including:
• Identifying journal entries and other
adjustments to test for all full scope
components based on risk criteria and
comparing the identified entries to supporting
documentation. These included those posted
by senior finance management, those posted
and approved by the same user and those
posted to unusual accounts.
• Assessing whether the judgements made
in making accounting estimates are indicative
of a potential bias.
Identifying and responding to risks of
material misstatement due to non-
compliance with laws and regulations
We identified areas of laws and regulations that
could reasonably be expected to have a material
effect on the financial statements from our
general commercial and sector experience,
and through discussion with the Directors (as
required by auditing standards) and discussed
with the Directors the policies and procedures
regarding compliance with laws and regulations.
As the Group is regulated, our assessment of
risks involved gaining an understanding of the
control environment including the entity’s
procedures for complying with regulatory
requirements.
We communicated identified laws and
regulations throughout our team and remained
alert to any indications of non-compliance
throughout the audit . This included
communication from the Group audit team to
full-scope component audit teams of relevant
laws and regulations identified at the Group
level, and a request for full scope component
auditors to report to the Group audit team any
instances of non-compliance with laws and
regulations that could give rise to a material
misstatement at the Group level.
The potential effect of these laws and
regulations on the financial statements
varies considerably.
Firstly, the Group is subject to laws and
regulations that directly affect the financial
statements including financial reporting
legislation (including related companies
legislation), distributable profits legislation
pension scheme legislation and taxation
legislation, and we assessed the extent of
compliance with these laws and regulations
as part of our procedures on the related
financial statement items.
Secondly, the Group is subject to many other
laws and regulations where the consequences
of non-compliance could have a material
effect on amounts or disclosures in the
financial statements, for instance through the
imposition of fines or litigation or the loss of the
Group’s license to operate. We identified the
following areas as those most likely to have
such an effect: health and safety, environmental
laws and regulations, anti-bribery and corruption,
employment law and export laws and
regulations, recognising the nature of the
Group’s activities. Auditing standards limit
the required audit procedures to identify
non-compliance with these laws and regulations
to enquiry of the Directors and inspection of
regulatory and legal correspondence, if any.
Therefore if a breach of operational regulations
is not disclosed to us or evident from relevant
correspondence, an audit will not detect
that breach.
Context of the ability of the audit to detect
fraud or breaches of law or regulation
Owing to the inherent limitations of an audit,
there is an unavoidable risk that we may not
have detected some material misstatements
in the financial statements, even though we
have properly planned and performed our audit
in accordance with auditing standards. For
example, the further removed non-compliance
with laws and regulations is from the events
and transactions reflected in the financial
statements, the less likely the inherently limited
procedures required by auditing standards
would identify it.
In addition, as with any audit, there remained
a higher risk of non-detection of fraud, as these
may involve collusion, forgery, intentional
omissions, misrepresentations, or the override
of internal controls. Our audit procedures are
designed to detect material misstatement.
We are not responsible for preventing non-
compliance or fraud and cannot be expected
to detect non-compliance with all laws
and regulations.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
113
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF SENIOR PLC CONTINUED
7. We have nothing to report on the
other information in the Annual Report
The Directors are responsible for the other
information presented in the Annual Report
together with the financial statements. Our
opinion on the financial statements does not
cover the other information and, accordingly,
we do not express an audit opinion or, except as
explicitly stated below, any form of assurance
conclusion thereon.
Our responsibility is to read the other
information and, in doing so, consider whether,
based on our financial statements audit work,
the information therein is materially misstated or
inconsistent with the financial statements or our
audit knowledge. Based solely on that work we
have not identified material misstatements in
the other information.
Strategic report and Directors’ report
Based solely on our work on the other
information:
• we have not identified material
misstatements in the strategic report and the
Directors’ report;
• in our opinion the information given in those
reports for the financial year is consistent
with the financial statements; and
• in our opinion those reports have been
prepared in accordance with the Companies
Act 2006.
Directors’ remuneration report
In our opinion the part of the Directors’
Remuneration Report to be audited has been
properly prepared in accordance with the
Companies Act 2006.
Disclosures of emerging and principal risks
and longer-term viability
We are required to perform procedures to
identify whether there is a material
inconsistency between the Directors’
disclosures in respect of emerging and principal
risks and the viability statement, and the
financial statements and our audit knowledge.
Based on those procedures, we have nothing
material to add or draw attention to in relation to:
• the Directors’ confirmation within the Viability
Statement page 64 that they have carried out
a robust assessment of the emerging and
principal risks facing the Group, including
those that would threaten its business model,
future performance, solvency and liquidity;
• the Risks and uncertainties disclosures
describing these risks and how emerging
risks are identified, and explaining how they
are being managed and mitigated; and
• the Directors’ explanation in the Viability
Statementof how they have assessed the
prospects of the Group, over what period they
have done so and why they considered that
period to be appropriate, and their statement
as to whether they have a reasonable
expectation that the Group will be able to
continue in operation and meet its liabilities
as they fall due over the period of their
assessment, including any related disclosures
drawing attention to any necessary
qualifications or assumptions.
We are also required to review the Viability
Statement, set out on page 64 under the
Listing Rules. Based on the above procedures,
we have concluded that the above disclosures
are materially consistent with the financial
statements and our audit knowledge.
Our work is limited to assessing these matters
in the context of only the knowledge acquired
during our financial statements audit. As we
cannot predict all future events or conditions and
as subsequent events may result in outcomes
that are inconsistent with judgements that
were reasonable at the time they were made,
the absence of anything to report on these
statements is not a guarantee as to the Group’s
and Company’s longer-term viability.
Corporate governance disclosures
We are required to perform procedures to
identify whether there is a material
inconsistency between the Directors’ corporate
governance disclosures and the financial
statements and our audit knowledge.
Based on those procedures, we have concluded
that each of the following is materially consistent
with the financial statements and our audit
knowledge:
• the Directors’ statement that they consider
that the annual report and financial
statements taken as a whole is fair, balanced
and understandable, and provides the
information necessary for shareholders to
assess the Group’s position and performance,
business model and strategy;
• the section of the annual report describing the
work of the Audit Committee, including the
significant issues that the audit committee
considered in relation to the financial
statements, and how these issues were
addressed; and
• the section of the annual report that describes
the review of the effectiveness of the Group’s
risk management and internal control
systems.
We are required to review the part of the
Corporate Governance Statement relating to the
Group’s compliance with the provisions of the
UK Corporate Governance Code specified by
the Listing Rules for our review. We have
nothing to report in this respect.
8. We have nothing to report on the other
matters on which we are required to
report by exception
Under the Companies Act 2006, we are
required to report to you if, in our opinion:
• adequate accounting records have not been
kept by the parent Company, or returns
adequate for our audit have not been received
from branches not visited by us; or
• the parent Company financial statements
and the part of the Directors’ Remuneration
Report to be audited are not in agreement
with the accounting records and returns; or
• certain disclosures of Directors’ remuneration
specified by law are not made; or
• we have not received all the information
and explanations we require for our audit.
We have nothing to report in these respects.
114
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
GOVERNANCE 10. The purpose of our audit work and to
whom we owe our responsibilities
This report is made solely to the Company’s
members, as a body, in accordance with
Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so
that we might state to the Company’s members
those matters we are required to state to them
in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other
than the Company and the Company’s
members, as a body, for our audit work, for this
report, or for the opinions we have formed.
Robert Brent
(Senior Statutory Auditor)
for and on behalf of KPMG LLP,
Statutory Auditor
Chartered Accountants
15 Canada Square, London, E14 5GL
25 February 2022
9. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set
out on page 108, the Directors are responsible
for: the preparation of the financial statements
including being satisfied that they give a
true and fair view; such internal control as
they determine is necessary to enable the
preparation of financial statements that are
free from material misstatement, whether
due to fraud or error; assessing the Group and
parent Company’s ability to continue as a going
concern, disclosing, as applicable, matters
related to going concern; and using the going
concern basis of accounting unless they either
intend to liquidate the Group or the parent
Company or to cease operations, or have
no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable
assurance about whether the financial
statements as a whole are free from material
misstatement, whether due to fraud or error,
and to issue our opinion in an auditor’s report.
Reasonable assurance is a high level of
assurance, but does not guarantee that an
audit conducted in accordance with ISAs (UK)
will always detect a material misstatement
when it exists. Misstatements can arise from
fraud or error and are considered material if,
individually or in aggregate, they could
reasonably be expected to influence the
economic decisions of users taken on the
basis of the financial statements.
A fuller description of our responsibilities
is provided on the FRC’s website at
www.frc.org.uk/auditorsresponsibilities.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
115
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2021
Revenue
Trading profit/(loss)
Share of joint venture profit
Operating profit/(loss) (1)
Investment income
Finance costs
Corporate undertakings
Profit/(loss) before tax (2)
Tax credit
Profit/(loss) for the period
Attributable to:
Equity holders of the parent
Earnings/(loss) per share
Basic (3)
Diluted (4)
(1) Adjusted operating profit
(2) Adjusted loss before tax
(3) Adjusted earnings/(loss) per share
(4) Adjusted and diluted earnings/(loss) per share
Year ended
2021
£m
Year ended
2020
£m
Notes
3
15
5
7
8
31
10
12
12
9
9
12
12
658.7
10.3
0.2
10.5
0.5
(8.5)
21.2
23.7
0.5
24.2
733.6
(177.5)
0.2
(177.3)
1.1
(11.0)
(4.6)
(191.8)
33.3
(158.5)
24.2
(158.5)
5.82p
5.73p
6.1
(1.9)
0.17p
0.17p
(38.20)p
(38.20)p
3.7
(6.2)
(0.84)p
(0.84)p
116
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2021
Profit/(loss) for the period
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss:
(Losses)/gains on foreign exchange contracts – cash flow hedges during the period
Reclassification adjustments for (gains)/losses included in profit
(Losses)/gains on foreign exchange contracts – cash flow hedges
Foreign exchange (gain)/loss recycled to the Income Statement on disposal and restructuring
(business closures)
Exchange differences on translation of overseas operations
Tax relating to items that may be reclassified
Items that will not be reclassified subsequently to profit or loss:
Actuarial gains/(losses) on defined benefit pension schemes
Tax relating to items that will not be reclassified
Other comprehensive income/(expense) for the period, net of tax
Total comprehensive income/(expense) for the period
Attributable to:
Equity holders of the parent
Notes
Year ended
2021
£m
Year ended
2020
£m
24.2
(158.5)
28
28
28
10
34
10
(2.1)
(1.3)
(3.4)
(2.9)
(3.8)
0.8
(9.3)
19.7
(6.4)
13.3
4.0
28.2
2.0
0.6
2.6
0.5
(3.6)
(0.5)
(1.0)
(11.4)
1.6
(9.8)
(10.8)
(169.3)
28.2
(169.3)
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
117
CONSOLIDATED BALANCE SHEET
As at 31 December 2021
Non-current assets
Goodwill
Other intangible assets
Investment in joint venture
Property, plant and equipment
Deferred tax assets
Retirement benefits
Trade and other receivables
Total non-current assets
Current assets
Inventories
Current tax receivables
Trade and other receivables
Cash and bank balances
Total current assets
Total assets
Current liabilities
Trade and other payables
Current tax liabilities
Lease liabilities
Bank overdrafts and loans
Provisions
Total current liabilities
Non-current liabilities
Bank and other loans
Retirement benefits
Deferred tax liabilities
Lease liabilities
Provisions
Others
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued share capital
Share premium account
Equity reserve
Hedging and translation reserve
Retained earnings
Own shares
Equity attributable to equity holders of the parent
Total equity
Year ended
2021
£m
Year ended
2020
£m
Notes
13
14
15
16
21
34
18
17
21
18
32c
23
21
22
19
24
19
34
21
22
24
25
26
27
28
29
30
150.2
4.2
3.9
294.6
5.7
72.2
0.1
530.9
145.2
2.6
98.0
51.1
296.9
827.8
143.0
14.6
0.4
14.8
13.8
186.6
116.2
11.0
10.5
72.8
2.2
3.4
216.1
402.7
425.1
41.9
14.8
5.8
28.6
343.2
(9.2)
425.1
425.1
165.0
4.8
3.6
330.5
4.7
46.5
0.1
555.2
147.6
3.0
85.3
23.6
259.5
814.7
126.1
19.8
0.5
0.4
23.5
170.3
152.6
10.9
5.5
76.0
2.3
3.8
251.1
421.4
393.3
41.9
14.8
5.1
37.9
305.1
(11.5)
393.3
393.3
The Financial Statements of Senior plc (registered number 282772) were approved by the Board of Directors and authorised for issue on
25 February 2022. They were signed on its behalf by:
David Squires
Director
Bindi Foyle
Director
118
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2021
Balance at 1 January 2020
Loss for the year 2020
Gains on foreign exchange contracts –
cash flow hedges
Foreign exchange loss/(gain) recycled to the Income
Statement on restructuring (business closures)
Exchange differences on translation
of overseas operations
Actuarial losses on defined benefit pension schemes
Tax relating to components of other
comprehensive income
Total comprehensive income/(expense)
for the period
Share-based payment charge
Tax relating to share-based payments
Purchase of shares held by employee benefit trust
Use of shares held by employee benefit trust
Transfer to retained earnings
Dividends paid
Balance at 31 December 2020
Profit for the year 2021
Losses on foreign exchange contracts –
cash flow hedges
Foreign exchange loss/(gain) recycled to the
Income Statement on disposal
Exchange differences on translation of overseas
operations
Actuarial gains on defined benefit pension schemes
Tax relating to components of other comprehensive
income
Total comprehensive income/(expense)
for the period
Share-based payment charge
Tax relating to share-based payments
Purchase of shares held by employee benefit trust
Use of shares held by employee benefit trust
Transfer to retained earnings
Dividends paid
Balance at 31 December 2021
All equity is attributable to equity holders of the parent
Notes
Issued
share
capital
£m
41.9
–
Share
premium
account
£m
14.8
–
Equity
reserve
£m
Hedging
reserve
£m
Translation
reserve
£m
5.5
–
(40.2)
–
79.1
–
Retained
earnings
£m
472.5
(158.5)
Own
shares
£m
(14.0)
–
Total
equity
£m
559.6
(158.5)
28
28
28
34
10
33
30
30
29
11
28
28
28
34
10
33
30
30
29
11
–
–
–
–
–
–
–
–
–
–
–
–
41.9
–
–
–
–
–
–
–
–
–
–
–
–
–
41.9
–
–
–
–
–
–
–
–
–
–
–
–
14.8
–
–
–
–
–
–
–
–
–
–
–
–
–
14.8
–
–
–
–
–
–
3.0
–
–
–
(3.4)
–
5.1
–
–
–
–
–
–
–
3.5
–
–
–
(2.8)
–
5.8
2.6
–
0.9
(0.4)
–
–
–
–
(3.6)
–
–
(11.4)
(0.5)
–
1.6
3.0
–
–
–
–
–
–
(37.2)
–
(4.0)
–
–
–
–
–
–
75.1
–
(168.3)
–
–
–
(2.5)
3.4
–
305.1
24.2
(3.4)
–
2.6
(5.5)
–
–
–
–
(3.8)
–
–
19.7
0.8
–
(6.4)
–
–
–
–
–
–
–
(37.2)
(9.3)
–
–
–
–
–
–
65.8
37.5
–
0.1
–
(2.3)
2.8
–
343.2
–
–
–
–
–
–
–
–
–
2.5
–
–
(11.5)
–
–
–
–
–
–
–
–
–
–
2.3
–
–
(9.2)
2.6
0.5
(3.6)
(11.4)
1.1
(169.3)
3.0
–
–
–
–
–
393.3
24.2
(3.4)
(2.9)
(3.8)
19.7
(5.6)
28.2
3.5
0.1
–
–
–
–
425.1
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
119
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2021
Net cash from operating activities
Investing activities
Interest received
Proceeds on disposal of property, plant and equipment
Purchases of property, plant and equipment
Purchases of intangible assets
Proceeds on disposal activities net of cash balances
Net cash generated/(used) in investing activities
Financing activities
Dividends paid
New loans
Repayment of borrowings
Repayment of lease liabilities
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Effect of foreign exchange rate changes
Cash and cash equivalents at end of period
Year ended
2021
£m
Year ended
2020
£m
27.0
48.9
Notes
32a
0.1
0.2
(20.2)
(1.1)
51.7
30.7
–
20.0
(41.1)
(8.4)
(29.5)
28.2
23.2
(0.3)
51.1
0.2
0.5
(25.2)
(1.6)
0.4
(25.7)
–-
135.6
(142.8)
(7.9)
(15.1)
8.1
15.1
–
23.2
16
14
31
11
32c
120
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. General information
Senior plc is a Company incorporated in England and Wales under the
Companies Act 2006. The address of the registered office is given on the
inside back cover. The nature of the Group’s operations and its principal
activities are set out in Note 3 and on pages 1 to 64.
Items included in the Financial Statements of each of the Group’s entities
are measured using the currency of the primary economic environment
in which the entity operates (the functional currency). These Financial
Statements are presented in Pounds Sterling, which is the Company’s
functional and the Group’s presentation currency.
2. Significant accounting policies
Basis of accounting
These Financial Statements have been prepared in accordance with
UK-adopted international accounting standards. They have been prepared
on the historical cost basis, except for the revaluation of certain financial
instruments and retirement benefit costs measured in accordance with
IAS 19.
Going concern
In determining the appropriate basis of preparation of the Financial
Statements for the year ended 31 December 2021, the Directors are
required to consider whether the Group and Parent Company can
continue in operational existence for the foreseeable future, being
a period of at least 12 months from the date of approval of these
Financial Statements (the “going concern period”).
The Board has applied a robust process to assess the resilience of
the forecast out-turns. This assessment included applying severe but
plausible downside risks as set out in the Viability Statement on page 64.
To address these risks the Board has considered mitigating factors that
could be employed that would address the impact and provide options
to the Group and Parent Company.
The Group has two existing covenants (“Existing Covenants”) for
committed borrowing facilities, which are tested at June and December:
the Group’s net debt to EBITDA (defined in the Notes to the Financial
Headlines) must not exceed 3.0x and interest cover, the ratio of EBITDA
to interest must be higher than 3.5x. The Group’s lenders, both banks
and US private placement investors, have been supportive and we agreed
covenant relaxations (“New Covenants”) in relation to the June 2020,
December 2020, June 2021 and December 2021 testing periods and
agreed an additional September 2021 testing period to provide financial
flexibility for the Group through this unprecedented period.
For the testing period ended 31 December 2021, the New Covenants
required the Group’s net debt to EBITDA must not exceed 4.5x, interest
cover must be higher than 3.5x and liquidity headroom must be higher
than £40.0m. At 31 December 2021, the Group’s net debt to EBITDA was
1.9x and interest cover was 7.3x, both comfortably within the Existing
(and New) Covenants limits. The Group’s liquidity headroom at £208.0m
was also comfortably within covenant limits. For all testing periods within
the Going Concern Period, there is sufficient headroom to remain within
the relevant covenant limits and the Group’s committed borrowing
facilities, even in a severe but plausible downside scenario.
Based on the above assessment, the Board has concluded that the
Group will continue to have adequate financial resources to realise its
assets and discharge its liabilities as they fall due over the going concern
period. Accordingly, the Directors have formed the judgement that
it is appropriate to prepare the Financial Statements on the going
concern basis.
Changes in accounting policies
At the date of authorisation of these Financial Statements, there are no
relevant and material new standards, amendments to standards or
interpretations which are effective for the year ended 31 December 2021.
Basis of consolidation
The Consolidated Financial Statements incorporate the Financial
Statements of Senior plc and the entities controlled by it (its subsidiaries)
made up to 31 December 2021. Control is achieved when Senior plc has
the power to govern the financial and operating policies of an invested
entity so as to obtain benefits from its activities.
Acquisitions of subsidiaries and businesses are accounted for using the
acquisition method. The consideration transferred for each acquisition
is the aggregate of the fair values (at the date of exchange) of assets
transferred, liabilities incurred or assumed, and equity interests issued
by the Group. The consideration transferred includes the fair value of any
asset or liability resulting from a contingent consideration arrangement.
Acquisition-related costs are expensed as incurred. Identifiable assets
acquired and liabilities and contingent liabilities assumed are measured
initially at their fair values at the acquisition date. On an acquisition-by-
acquisition basis, the Group recognises any non-controlling interest in
the acquiree either at fair value or at the non-controlling interest’s
proportionate share of the acquiree’s net assets.
The results of subsidiaries acquired or disposed of during the year are
included in the Consolidated Income Statement from the effective date
of acquisition or up to the effective date of disposal, as appropriate.
The results of joint ventures are accounted for using the equity
accounting method.
Where necessary, adjustments are made to the Financial Statements of
subsidiaries to bring the accounting policies used in line with those used
by the Group.
All intra-group transactions, balances, income and expenses are
eliminated on consolidation.
Goodwill
Goodwill arising on consolidation, which was acquired in a business
combination, is measured as the excess of the consideration transferred,
the amount of any non-controlling interest in the acquiree and the
acquisition date fair value of any previous equity interest in the acquiree
over the fair value of the Group’s share of the identifiable net assets
acquired. Goodwill is recognised as an asset and allocated, at acquisition,
to the group of cash-generating units (CGU groups) that are expected to
benefit from that business combination. If the consideration transferred,
the amount of any non-controlling interest in the acquiree and the
acquisition date fair value of any previous equity interest in the acquiree
is less than the fair value of the net assets acquired (i.e. bargain purchase),
the difference is credited to the Consolidated Income Statement in the
period of acquisition.
CGU groups to which goodwill has been allocated are tested for
impairment at least annually and reviewed for indicators of impairment
at the Balance sheet date. If impairment indicators exist, the individual
assets within the CGUs, and the individual CGUs excluding goodwill, are
tested for impairment before the CGU group is tested for impairment. Any
impairment is recognised immediately through the Consolidated Income
Statement and is not subsequently reversed. The determination of the
recoverable amount of the CGU group is disclosed in the Notes to the
Financial Statements (Note 13). If the recoverable amount of the CGU
group is less than its carrying amount, the impairment loss is allocated
first to reduce the carrying amount of any goodwill allocated to the CGU
group and then to the other assets of the CGU group pro rata on the basis
of the carrying amount of each asset in the CGU group.
On disposal of a subsidiary or part thereof, the attributable amount of
goodwill is included in the determination of the profit or loss on disposal.
Goodwill acquired in a business combination prior to the date of transition
to IFRS has been retained at the previous UK GAAP amount subject to
being tested for impairment at that date. Goodwill written off to reserves
under UK GAAP prior to 1998 has not been reinstated and is not included
in determining any subsequent profit or loss on disposal.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
121
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
2. Significant accounting policies continued
Revenue recognition
The Group predominantly has one revenue stream relating to engineered
components or systems (products), which are customer specific,
with a secondary revenue stream of funded development revenue.
Both streams have identifiable customer contracts and pricing specific
performance obligations.
The transaction price is the amount of consideration to which an entity
expects to be entitled in exchange for transferring promised goods or
services to a customer. Revenue is recognised net of discounts, VAT and
other sales related taxes. The determination of the transaction price is
based upon pricing specified in the customer contract i.e. a price per unit.
Revenue is recognised as the identified performance obligations
are satisfied.
The performance obligation for goods is a specific point in time when
the customer obtains control, which is upon delivery or when available
for collection. Allocation of transaction price to performance obligations
is given in the contract i.e. a unit delivered or available for collection.
The performance obligation for development revenue is a specific point
in time when the customer obtains control of the output, for example a
first article good, which is the acceptance milestone specified in the
customer contract.
Dividend income from investments is recognised when the shareholders’
legal rights to receive payment have been established.
Interest
Interest receivable/payable is credited/charged to the Consolidated
Income Statement using the effective interest method.
Leasing
At inception of a contract, the Group assesses whether a contract is,
or contains, a lease. A contract is, or contains, a lease if the contract
conveys a right to control the use of an identified asset for a period of
time in exchange for consideration. The assessment of control includes
whether the Group has a right to obtain substantially all of the economic
benefits from the use of the asset throughout the period of use and the
right to direct the use of the asset.
As a lessee, the Group recognises a right-of-use asset and lease liability
at the lease commencement date. The right-of-use asset is initially
measured at cost, which comprises the initial amount of the lease
liability adjustment for any lease payments made at or before the
commencement date, plus any initial direct costs incurred and an
estimate of costs to dismantle or restore the underlying asset, less any
lease incentives received.
Lease payments comprise fixed payments and variable lease payments
based on an index or rate. The right-of-use asset is subsequently
depreciated using the straight-line method from the commencement date
to the earlier of the end of the useful life of the asset or the end of the
lease term. The lease term includes optional extensions or terminations
which are reasonably certain to be exercised by the Group. These optional
terms are reassessed periodically or when there is a significant event
which affects the lease. The estimated useful lives of the right-of-use
assets are determined on the same basis as those of property, plant and
equipment. Periodically the right-of-use asset is reduced for impairment,
if necessary, as well as re-measurements of the lease liability.
The lease liability is measured at amortised cost using the effective
interest method, which is initially equal to the present value of lease
payments that are not paid at the commencement date, discounted
using an incremental borrowing rate determined on a lease portfolio
basis. The lease liability is re-measured either as a modification or
reassessment. Modification occurs where there is a change in terms,
such as rental payments, which did not form part of the original terms
of the contract. In this case, the lease liability is re-measured using
the revised terms and a revised incremental borrowing rate at the
modification date. Reassessment occurs where there are changes within
the scope of the original terms of the contract, such as rental payments
changes with reference to an index. For reassessment changes, the lease
liability is re-measured in the same way as for a modification, except for
the incremental borrowing rate, which is not changed from the original
commencement date of the contract.
The Group has elected not to recognise right-of-use assets and lease
liabilities for short-term leases which have a lease term of 12 months or
less and leases of low-value assets. The Group recognises the lease
payments associated with these leases as an expense on a straight-line
basis over the lease term. When the Group acts as a lessor, it determines
at lease inception whether each lease is a finance lease or an operating
lease. To classify each lease, several indicators are assessed, such as the
present value of the lease payments amounting to at least substantially
all of the fair value of the asset. When the Group is an intermediate lessor,
it accounts for its interest in the head lease and the sub-lease separately.
The Group assesses the classification of the sub-lease with reference to
the right-of-use asset arising from the head lease. The Group recognises
lease payments received under operating leases as income on a straight-
line basis over the lease term.
Foreign currencies
Transactions in currencies other than the functional currency are recorded
at the rates of exchange prevailing on the date of the transaction. At each
Balance Sheet date, monetary assets and liabilities that are denominated
in foreign currencies are retranslated at the rates prevailing on the Balance
Sheet date. Non-monetary items carried at fair value that are denominated
in foreign currencies are translated at the rates prevailing at the date when
the fair value was determined. Non-monetary items that are measured at
historical cost in a foreign currency are not retranslated. Gains and losses
arising on retranslation are included in profit or loss for the period, except
for exchange differences arising on non-monetary assets and liabilities
where the changes in fair value are recognised directly in equity, subject
to meeting the requirements under IAS 21.
In order to hedge its exposure to certain foreign exchange risks, the Group
enters into forward exchange contracts (see section below on derivative
financial instruments and hedging for details of the Group’s accounting
policies in respect of such derivative financial instruments).
On consolidation, the assets and liabilities of the Group’s overseas
operations are translated at exchange rates prevailing on the Balance
Sheet date. Income and expense items are translated at the average
exchange rates for the period. Exchange rate differences arising, if any,
are classified as equity and transferred to the Group’s translation reserve.
Such translation differences are recognised as income or expense in
the period in which the operation is disposed.
Goodwill and fair value adjustments arising on the acquisition of a foreign
entity are treated as assets and liabilities of the foreign entity and
translated at the closing rate on the relevant Balance Sheet date.
The exchange rates for the major currencies applied in the translation
of results were as follows:
US Dollar
Average
rates
2021
1.38
Average
rates
2020
1.29
Year-end
rates
2021
Year-end
rates
2020
1.35
1.37
122
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
FINANCIAL STATEMENTS 2. Significant accounting policies continued
Government grants
Government grants received for items of a revenue nature are recognised
as income over the period necessary to match them with the related
costs, which are deducted in reporting the related expense and presented
net of the costs to which they relate. The Group recognises a COVID-19
grant when it has reasonable assurance that it will comply with the
relevant conditions and the grant will be received. If the conditions
are met, then the Group recognises income in the profit or loss on a
systematic basis and in line with its recognition of the expenses that
the grants are intended to compensate.
Government grants relating to investment in property, plant and
equipment are deducted from the initial carrying value of the related
capital asset.
Retirement benefit costs
Payments to defined contribution retirement plans are charged as an
expense as they fall due. Payments made to state-managed retirement
benefit plans are dealt with as payments to defined contribution plans
where the Group’s obligations under the plans are equivalent to those
arising in a defined contribution retirement plan.
For defined benefit retirement plans, the cost of providing benefits
is determined using the Projected Unit Method, with full actuarial
valuations being carried out on a triennial basis, and updated at each
Balance Sheet date. Actuarial gains and losses are recognised in full
in the period in which they occur. They are recognised outside the
Consolidated Income Statement and are presented in the Statement
of Comprehensive Income.
Past service cost is recognised as an expense at the earlier of a plan
amendment, curtailment, or restructuring.
The retirement benefit obligation recognised in the Consolidated Balance
Sheet represents the present value of the defined benefit obligation,
and as reduced by the fair value of scheme assets.
Taxation
Provisions for uncertain tax positions are included within current tax
liabilities on the Consolidated Balance Sheet representing Management’s
best estimate of the likely cash outflow related to the uncertainty.
There are transactions and activities that the Group engages in where
the ultimate tax determination is uncertain and a provision may be
made against the tax benefit. For example, the Group seeks to price
transactions between Group companies on an arms length basis and in
compliance with OECD transfer pricing principles and the laws of the
relevant jurisdictions. The application of OECD principles and local tax
laws require interpretation, and accordingly involves the application of
judgment and is open to challenge by the relevant tax authorities. This
gives rise to a level of uncertainty. Provisions for uncertain tax positions
are established in accordance with IFRIC 23 based on an assessment
of the range of likely tax outcomes in open years and reflecting the
strength of technical arguments. Amounts are provided for individual tax
uncertainties based on Management’s assessment of whether the most
likely amount or an expected amount based on a probability weighted
methodology is the more appropriate predicter of amounts that the
company is ultimately expected to settle. When making this assessment,
the Group utilises specialist in-house tax knowledge and experience and
takes into consideration specialist tax advice from third party advisers
on specific items.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities in
the Financial Statements and the corresponding tax bases used in the
computation of taxable profit, and is accounted for using the Balance
Sheet liability method. Deferred tax liabilities are generally recognised
for all taxable temporary differences, including for taxable temporary
differences arising on investments in subsidiaries and associates, and
interests in joint ventures, except where the Group is able to control the
reversal of the temporary difference and it is probable that the temporary
difference will not reverse in the foreseeable future.
Deferred tax assets are recognised to the extent that it is probable
that future taxable profits will be available for their utilisation before
their expiry. Amounts will be recognised first to the extent that taxable
temporary differences exist and it is considered probable that they will
reverse and give rise to future taxable profits against which losses or
other assets may be utilised before their expiry. Assets will then be
recognised to the extent that forecasts or other evidence support
the availability of future profits against which assets may be realised.
Deferred tax assets and liabilities are not recognised if the temporary
difference arises from goodwill or from the initial recognition of goodwill
(other than in a business combination) of other assets and liabilities
in a transaction that affects neither the Group’s taxable profit nor its
accounting profit.
The carrying value of deferred tax assets is reviewed at each Balance
Sheet date and reduced to the extent it is no longer probable that
sufficient taxable profits will be available to allow all or part of the deferred
tax asset to be recovered. Deferred tax is calculated at the tax rates
that are expected to apply in the period when the liability is settled or the
asset is realised based on tax laws and rates that have been enacted
at the Balance Sheet date. Deferred tax is charged or credited in the
Consolidated Income Statement, except when it relates to items charged
or credited to Other Comprehensive Income or directly to Equity, in which
case the deferred tax is also dealt with in Other Comprehensive Income
or Equity.
Property, plant and equipment
Land and buildings held for use in the production or supply of goods or
services, or for administrative purposes, are stated in the Balance Sheet
at their historical cost, or at modified historical cost, being a revaluation
undertaken in 1988 which has been taken as the effective cost on
transition to IFRS. Land and buildings were revalued to fair value
at the date of revaluation. The Group does not intend to conduct
annual revaluations.
Plant and equipment are stated at cost less accumulated depreciation and
any recognised impairment loss. Depreciation is charged to write off the
cost of an asset on a straight-line basis over the estimated useful life of
the asset, and is charged from the time an asset becomes available for
its intended use. Annual rates are as follows:
Freehold land
Freehold buildings
Right-of-use land and
buildings
Nil
2%
on the same basis as owned assets or,
where shorter, over the lease term
Leasehold building
improvements
Plant and equipment
Right-of-use plant and
equipment
on the same basis as owned assets or,
where shorter, over the lease term
5%–33%
on the same basis as owned assets or,
where shorter, over the lease term
The Group primarily leases land and buildings for manufacturing use.
The lease term, including options to extend which are reasonably certain,
typically range from two to fifteen years. The Group also leases plant
and equipment, including office equipment, vehicles and manufacturing
equipment, with lease terms typically ranging from one to four years.
The gain or loss arising on the disposal or retirement of an asset is
determined as the difference between the sale proceeds and the carrying
amount of the asset at disposal and is recognised in the Consolidated
Income Statement.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
123
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
2. Significant accounting policies continued
Internally generated intangible assets – development expenditure
An intangible asset arising from unfunded development work shall be
recognised if the following can be demonstrated:
i.
the asset can be separately identified.
ii. it is probable that the asset created will generate future economic benefits.
iii. the development cost of the asset can be measured reliably during its development.
iv. it is technically feasible to complete the asset so that it will be available for use
or sale.
v. there is intention to complete the asset and use or sell it.
vi. the Group has ability to use or sell the asset.
vii. the Group has availability of adequate technical, financial and other resources to
complete the development work and to use or sell the asset.
Internally generated intangible assets are amortised on a straight-line
basis over their useful lives. Costs incurred in relation to funded
development work are accumulated in inventory and are recognised when
the related billings are made. Any amounts held in inventory are subject to
normal inventory valuation principles. Expenditure on research, design and
other development activities, that do not meet the capitalisation criteria
above, is recognised as an expense in the period in which it is incurred.
Other intangible assets
Other intangible assets include computer software and intangible assets
acquired as part of a business combination. The cost of acquiring
computer software (including associated implementation and
development costs where applicable) is classified as an intangible asset.
Costs associated with maintaining computer software programs are
recognised as an expense as incurred. Capitalised computer software
is amortised over its estimated useful life of between three and five
years on a straight-line basis, and is stated at cost less accumulated
amortisation and impairment losses. Intangible assets acquired as part
of a business combination principally comprise customer relationships,
contracts and trade names. They are shown at fair value at the date of
acquisition less accumulated amortisation at the rates of between three
and five years on a straight-line basis.
Impairment of tangible and intangible assets excluding goodwill
At each Balance Sheet date, the Group reviews the carrying amounts
of its tangible and intangible assets to determine whether there is any
indication that those assets have suffered an impairment loss. If any
such indication exists, the recoverable amount of the asset is estimated
in order to determine the extent of the impairment loss (if any).
Where the asset does not generate cash flows that are independent
from other assets, the Group estimates the recoverable amount of
the cash-generating unit to which the asset belongs.
The recoverable amount is the higher of the fair value less the costs to sell
and the value in use. In assessing the value in use, the estimated future
cash flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value of money
and the risks specific to the asset for which the estimates of future cash
flows have not been adjusted.
If the recoverable amount of an asset is estimated to be less than its
carrying amount, the carrying amount of the asset is reduced to its
recoverable amount. An impairment loss is recognised as an expense
immediately, unless the relevant asset is carried at a revalued amount,
in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of
the asset is increased to the revised estimate of its recoverable amount,
so that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been
recognised for the asset in prior years. A reversal of an impairment loss is
recognised as income immediately, unless the relevant asset is carried at
a revalued amount, in which case the reversal of the impairment loss is
treated as a revaluation increase.
Inventories
Inventories are stated at the lower of cost and net realisable value. Costs
comprise direct materials and, where applicable, direct labour costs and
an appropriate allocation of production overheads. Cost is calculated using
the first-in, first-out method. Net realisable value represents the estimated
selling price less the estimated costs of completion and the costs to be
incurred in marketing, selling and distribution.
Financial instruments
Financial assets and liabilities are recognised when the Group becomes
a party to the contractual provisions of the relevant instrument and
derecognised when it ceases to be a party to such provisions.
Financial instruments are classified as cash and cash equivalents, bank
overdrafts and loans, lease liabilities, trade receivables, trade payables,
deferred consideration receivable, other receivables and other payables,
as appropriate.
Non-derivative financial assets are categorised as “Financial assets at
amortised cost” and non-derivative financial liabilities are categorised
as “Financial liabilities at amortised cost”. Derivative financial assets and
liabilities that are not designated and effective as hedging instruments are
categorised as “financial assets at fair value through profit or loss” and
“financial liabilities at fair value through profit or loss”, respectively. The
classification depends on the nature and purpose of the financial assets
and liabilities and is determined at the time of initial recognition.
Trade receivables
Trade receivables do not carry any interest and are stated at their nominal
value as reduced by loss allowance. The Group has elected to measure
loss allowance for trade receivables at an amount equal to the lifetime
expected credit losses (”ECLs”), which are based on quantitative and
qualitative credit risk assessments, using historical and forward looking
information. Changes in the carrying amounts of the loss allowance are
recognised in the Consolidated Income Statement.
Trade receivables in default are considered uncollectible and are written
off against the loss allowance. The Group considers a trade receivable
to be in default when the customer is experiencing significant financial
difficulties, bankruptcy, financial reorganisation or is in default or
delinquent in paying its credit obligations to the Group in full. Subsequent
recoveries of amounts previously written off are credited against the
loss allowance.
Trade receivables are derecognised when reverse factored, without
recourse, through schemes with financial institution counterparties
who assume the risk of non-payment by the customer. Derecognition
occurs when cash is received from the financial institution (less reverse
factoring discount). For further details, see Strategic Report and the
financial instrument credit risk section in the notes to the Consolidated
Financial Statements.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and other short-term
highly liquid investments that are readily convertible to a known amount
of cash and are subject to an insignificant risk of changes in value.
Non-derivative financial liabilities
Non-derivative financial liabilities are stated at amortised cost using the
effective interest method. The effective interest method is a method of
calculating the amortised financial liability and of allocating interest over
the relevant period. The effective interest rate is the rate that exactly
discounts estimated future cash payments through the expected life of
the financial liability, or, where appropriate, a shorter period, to the net
carrying amount on initial recognition. For borrowings, their carrying value
includes accrued interest payable, as well as unamortised issue costs.
Equity instruments
Equity instruments issued by the Company are recorded at the value
of the proceeds received, net of direct transaction costs.
124
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
FINANCIAL STATEMENTS 2. Significant accounting policies continued
Derivative financial instruments and hedging
The Group’s activities expose it primarily to the financial risks of changes
in foreign currency exchange rates and interest rates. The Group uses
foreign exchange contracts and, on occasion, interest rate swap contracts
to hedge these exposures. The use of financial derivatives is governed
by the Group’s Treasury Policies as approved by the Board of Directors,
which provides written principles on the use of derivatives. The Group
does not use derivative financial instruments for speculative purposes.
Certain derivative instruments do not qualify for hedge accounting. These
are categorised as “fair value through profit or loss” and are stated at fair
value, with any resultant gain or loss recognised in the Income Statement.
The Group designates certain hedging instruments in respect of foreign
currency risk as cash flow hedges. At the inception of the hedge
relationship, the Group documents the relationship between the hedging
instrument and the hedged item, along with its risk management
objectives and strategy for undertaking various hedging transactions. The
Group also documents, both at hedge inception and on an ongoing basis,
whether the hedging instrument that is used in a hedging relationship is
highly effective in offsetting changes in fair values or cash flows of the
hedged item.
Assets and disposal groups held for sale
Assets are classified as held for sale if their carrying amount will be
recovered by sale rather than by continuing use in the business. Where a
group of assets and their directly associated liabilities are to be disposed
of in a single transaction, such disposal groups are also classified as held
for sale. For this to be the case, the asset or disposal group must be
available for immediate sale in its present condition, and Management
must be committed to and have initiated a plan to sell the asset or
disposal group which, when initiated, was expected to result in a
completed sale within 12 months. Assets that are classified as held for
sale are not depreciated. Assets or disposal groups that are classified as
held for sale are measured at the lower of their carrying amount and fair
value less costs to sell.
Provisions
Provisions are recognised when the Group has a present obligation (legal
or constructive) as a result of a past event, it is probable that the Group
will be required to settle that obligation and a reliable estimate can be
made of the amount of the obligation. Provisions are measured at the
Directors’ best estimate of the expenditure required to settle the
obligation at the Balance Sheet date, taking into account the risks and
uncertainties (such as timing or amount) surrounding the obligation.
They are not discounted to present value if the effect is not material.
For the Group’s cash flow hedges of highly probable forecast transactions
in foreign currencies, the hedged risk is always considered to be 1:1. If the
underlying exposure changes over time, either due to commercial factors
or timing differences, the hedging instruments will be rebalanced to
ensure that the hedge ratio of 1:1 is maintained.
Provisions for restructuring are recognised when the Group has a detailed
formal plan for the restructuring and the plan has been communicated
to the affected parties. Provisions for the expected cost for warranty
obligations under local sale of goods legislation are recognised at the
date of sale of the relevant products.
Changes in the fair value of derivative financial instruments that are
designated and are effective as a cash flow hedge are recognised directly
in equity and the ineffective portion is recognised immediately in the
Consolidated Income Statement. If the cash flow hedge of a firm
commitment or forecasted transaction results in the recognition of an
asset or a liability, then, at the time the asset or liability is recognised,
the associated gains or losses on the derivative that had previously been
recognised in equity are included in the initial measurement of the asset
or liability. For hedges that do not result in the recognition of an asset or a
liability, amounts deferred in equity are recognised in the Income Statement
in the same period in which the hedged item affects profit or loss.
For an effective hedge of an exposure to changes in fair value, the hedged
item is adjusted for changes in fair value attributable to the risk being
hedged with the corresponding entry in the Consolidated Income
Statement. Gains or losses from remeasuring the derivative are also
recognised in the Consolidated Income Statement. If the hedge is
effective, these entries will offset in the Consolidated Income Statement.
Changes in the fair value of derivative financial instruments that do not
qualify for hedge accounting are recognised in the Consolidated Income
Statement as they arise.
Hedge accounting is discontinued when the hedging instrument
expires or is sold, terminated, exercised, or no longer qualifies for hedge
accounting. At that time, any cumulative gain or loss on the hedging
instrument recognised in equity is retained in equity until the forecasted
transaction occurs. If a hedged transaction is no longer expected to occur,
the net cumulative gain or loss recognised in Equity is transferred to
the Consolidated Income Statement for the period.
Gains and losses accumulated in Equity are recognised in the
Consolidated Income Statement on disposal of the overseas business.
Share-based payments
The Group applies the requirements of IFRS 2 Share-based payments.
The Group issues equity-settled share-based payments to certain
employees. The fair value (excluding the effect of non-market-related
conditions), as determined at the grant date, is expensed on a straight-line
basis over the vesting period, based on the Group’s estimate of the
number of shares that will eventually vest and adjusted for the effect
of non-market-related conditions.
Fair value is measured by use of a Black-Scholes model for the share
option plans, and a binomial model for the share awards under the 2005
Long-Term Incentive Plan.
The liability in respect of equity-settled amounts is included in Equity.
Critical accounting judgments
IAS 1 requires disclosure of the judgments Management makes when
applying its significant accounting policies and that have the most
significant effect on amounts that are recognised in the Group’s Financial
Statements. In the course of preparing the Financial Statements, no
significant critical judgments have been made in the process of applying
the Group’s accounting policies, other than leases and those involving
estimations, which are dealt with separately below. Management makes
other judgments in the normal course of conducting business, such as
those in relation to legal claims and contractual matters (see Note 24 for
further details).
Leases
Where a lease includes the option for an extension to the lease term,
Management makes a judgment as to whether they are reasonably
certain the option will be taken. This will take into account the length of
time remaining before the option is exercisable, current and forecasted
plans for utilising the asset and the level and type of planned future capital
investment. As at 31 December 2021, these extension options have an
approximate average remaining lease term of six years. These judgments
are reassessed at each reporting period, which could result in a
recalculation of the lease liability and a material adjustment to the
associated balances.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
125
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
2. Significant accounting policies continued
Key sources of estimation and uncertainty
When applying the Group’s accounting policies, Management must make
assumptions and estimates concerning the future that affect the carrying
amounts of assets and liabilities at the Balance Sheet date and the
amounts of revenue and expenses recognised during the period. Such
assumptions are based upon factors including historical experience,
the observance of trends in the industries in which the Group operates,
and information available from the Group’s customers and other external
sources. The key sources of estimation and uncertainty at the Balance
Sheet date that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next financial year
and beyond include:
Income taxes
In determining the Group provisions for income tax and deferred tax,
it is necessary to consider transactions in a small number of key tax
jurisdictions for which the ultimate tax determination is uncertain. To the
extent that the final outcome differs from the tax that has been provided,
adjustments will be made to income tax and deferred tax provisions held
in the period the determination is made. The carrying amount of net
current tax liability and deferred tax liability at 31 December 2021 was
£12.0m (2020 – £16.8m) and £4.8m (2020 – £0.8m), respectively.
Further details on these estimates are set out in Notes 10 and 21.
Retirement benefits
Management makes assumptions and estimates, for the next financial
year and beyond, which affect the value of the carrying amount of the UK
Plan retirement benefit obligation at 31 December 2021. Management
follows actuarial advice from a third party when determining estimation
uncertainty on the valuation of the UK gross defined benefit obligation,
the significant assumptions being discount rate, inflation and life
expectancy (see Note 34). The carrying amount of the UK Plan’s
retirement benefits at 31 December 2021 was a surplus of £72.2m
(2020 – surplus of £46.5m), being the present value of the defined benefit
obligations of £294.9m (2020 – £317.7m) and fair value of plan assets
of £367.1m (2020 – £364.2m). Further details and sensitivities from
changes in estimates are set out in Note 34g.
Other estimates
The Board has considered the estimation applied to inventory and
concluded that there is not a significant risk of a material adjustment
arising over the next financial year. Management assesses the carrying
value of inventory to ensure that it is held at the lower of cost and net
realisable value. Where necessary, Management makes an estimate to
write down inventory to its net realisable value. The Group held a net
inventory balance at the year-end of £145.2m (2020 – £147.6m). In
determining an estimate of net realisable value, Management has made
assumptions in respect of the durability, quality, specificity and order
cover, which provide some protection against adverse market conditions,
and competitor product development and pricing activity. Inventory held is
typically built on a demand basis and is customer specific. In 2021, £1.5m
inventory impairments have been reversed (2020 – £9.3m impairment
charge) where demand has picked up on previously reduced or cancelled
specific programmes, only to the extent that there are confirmed orders
in place. Management does not anticipate further material adjustments
to inventory to arise over the next financial year, subject to further
unforeseen changes in market conditions.
The Board previously approved a restructuring plan that covered 2019, 2020
and 2021. In response to COVID-19, the Group implemented further cost
cutting actions which included asset write downs. At 31 December 2021,
a provision of £1.3m (2020 – £8.9m) is recorded relating to committed
restructuring plans that have been communicated to those effected and
where the cash outflow is anticipated to occur in 2022. The restructuring
charges recorded in 2021 include asset impairments where demand on
specific programmes has ceased or significantly decreased, and where
there is no alternate use. Management does not anticipate further material
adjustments to the restructuring provision recorded at 31 December 2021
over the next financial year as the commitments are settled, subject to
unforeseen changes in market conditions.
126
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
Goodwill impairment assessment has been removed as a key estimate
in 2021 given sufficiency of headroom and no identified triggering events
at 31 December 2021 (see Note 13 for sensitivities). The Board does not
consider there to be a significant risk of material adjustment arising for
goodwill impairment over the next financial year.
The Directors have considered the impact of Climate Risk on the Financial
Statements for the year ending 31 December 2021 to be immaterial, given
the longer term view of Climate Risk compared to the short to mid-term
planning cycle on which asset and liability values are based upon.
3. Revenue
Total revenue is disaggregated by market sectors as follows:
Civil Aerospace
Defence
Other
Aerospace
Land Vehicles
Power & Energy
Flexonics
Eliminations
Total revenue
Year ended
2021
£m
Year ended
2020
£m
244.5
125.0
69.8
439.3
118.8
101.1
219.9
304.2
158.5
63.5
526.2
89.2
119.1
208.3
(0.5)
(0.9)
658.7
733.6
Other Aerospace comprises space and non-military helicopters and
other markets, principally including semiconductor, medical, and
industrial applications.
The Group applies the practical expedient in paragraph 121 of IFRS 15
and does not disclose information about remaining performance
obligations that have original expected durations of one year or less.
Applying the practical expedient in paragraph 94 of IFRS 15, the Group
recognises the incremental costs of obtaining contracts as an expense
when incurred if the amortisation period of the assets that the Group
otherwise would have recognised is one year or less.
4. Segment information
The Group reports its segment information as two operating Divisions
according to the market segments they serve, Aerospace and Flexonics,
which is consistent with the oversight employed by the Executive
Committee. The chief operating decision-maker, as defined by IFRS 8,
is the Executive Committee. The Group is managed on the same basis,
as two operating Divisions.
The accounting policies of the reportable segments are the same as the
Group’s accounting policies described in Note 2 and the sales between
segments are carried out at arm’s length. Adjusted operating profit, as
described in Note 9, is the key measure reported to the Group’s Executive
Committee for the purpose of resource allocation and assessment of
segment performance. Investment income, finance costs and tax are not
allocated to segments, as this type of activity is driven by the central tax
and treasury functions.
Segment assets include directly attributable computer software assets,
property, plant and equipment (including right-of-use assets), working
capital assets, goodwill and intangible assets from acquisitions. Cash,
deferred and current tax and other financial assets (except for working
capital) are not allocated to segments for the purposes of reporting
financial performance to the Executive Committee.
Segment liabilities include directly attributable working capital liabilities
and lease liabilities. Debt, retirement benefits, deferred and current tax
and other financial liabilities (except for working capital) are not allocated
to segments for the purposes of reporting financial performance to the
Executive Committee.
FINANCIAL STATEMENTS 4. Segment information continued
Central costs, assets and liabilities are corporate items not allocated to segments, which is consistent with the format used by the chief operating
decision-maker.
Segment information for revenue, operating profit/loss and a reconciliation to entity and profit/loss after tax is presented below:
Aerospace
Year ended
2021
£m
Flexonics
Year ended
2021
£m
Notes
Eliminations/
central
costs
Year ended
2021
£m
Total
Year ended
2021
£m
Aerospace
Year ended
2020
£m
Flexonics
Year ended
2020
£m
Eliminations/
central
costs
Year ended
2020
£m
Total
Year ended
2020
£m
External revenue
Inter-segment revenue
Total revenue
Adjusted trading profit
Share of joint venture profit
Adjusted operating profit
Amortisation of intangible
assets from acquisitions
Goodwill impairment
and write-off
Net restructuring income/
(costs)
Operating profit/(loss)
Investment income
Finance costs
Corporate undertakings
Profit/(loss) before tax
Tax
Profit/(loss) after tax
9
9
9
438.9
0.4
439.3
7.9
–
7.9
–
–
2.2
10.1
219.8
0.1
219.9
12.9
0.2
13.1
–
–
–
(0.5)
(0.5)
(14.9)
–
(14.9)
–
–
2.2
15.3
–
(14.9)
525.4
0.8
526.2
5.9
–
5.9
208.2
0.1
208.3
11.0
0.2
11.2
(6.3)
(1.4)
(112.1)
(22.2)
–
(0.9)
(0.9)
(13.4)
–
(13.4)
–
–
(32.5)
(145.0)
(6.5)
(18.9)
–
(13.4)
658.7
–
658.7
5.9
0.2
6.1
–
–
4.4
10.5
0.5
(8.5)
21.2
23.7
0.5
24.2
733.6
–
733.6
3.5
0.2
3.7
(7.7)
(134.3)
(39.0)
(177.3)
1.1
(11.0)
(4.6)
(191.8)
33.3
(158.5)
Trading profit and adjusted trading profit is operating profit/loss and adjusted operating profit respectively before share of joint venture profit. See
Note 9 for the derivation of adjusted operating profit.
Segment information for assets, liabilities, additions to non-current assets and depreciation and amortisation is presented below:
Assets
Aerospace
Flexonics
Segment assets for reportable segments
Unallocated
Central
Cash
Deferred and current tax
Retirement benefits
Others
Total assets per Consolidated Balance Sheet
Liabilities
Aerospace
Flexonics
Segment liabilities for reportable segments
Unallocated
Central
Debt
Deferred and current tax
Retirement benefits
Others
Total liabilities per Consolidated Balance Sheet
Year ended
2021
£m
Year ended
2020
£m
506.6
184.9
691.5
4.6
51.1
8.3
72.2
0.1
827.8
563.3
170.4
733.7
2.9
23.6
7.7
46.5
0.3
814.7
Year ended
2021
£m
Year ended
2020
£m
148.1
63.9
212.0
15.4
131.0
25.1
11.0
8.2
402.7
153.9
55.7
209.6
14.1
153.0
25.3
10.9
8.5
421.4
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
127
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
4. Segment information continued
Aerospace
Flexonics
Sub total
Central
Total
The Group’s revenues from its major products is presented below:
Aerospace – Structures
Aerospace – Fluid Systems
Aerospace total
Land vehicles
Power & Energy
Flexonics total
Group total
Additions to
non-current
assets
Year ended
2021
£m
Additions to
non-current
assets
Year ended
2020
£m
Depreciation
and
amortisation
Year ended
2021
£m
Depreciation
and
amortisation
Year ended
2020
£m
12.9
10.3
23.2
0.1
23.3
20.8
8.7
29.5
0.2
29.7
35.1
12.2
47.3
0.5
47.8
45.9
15.1
61.0
0.6
61.6
Year ended
2021
£m
Year ended
2020
£m
178.9
260.0
438.9
118.8
101.0
219.8
658.7
234.4
291.0
525.4
89.2
119.0
208.2
733.6
No individual customer accounted for more than 10% of external revenue in 2021 or 2020
Geographical information
The Groups’ operations are located principally in North America and UK.
The following table provides an analysis of the Group’s sales by geographical market, irrespective of the origin of the goods. The carrying values of
segment non-current assets are analysed by the geographical area in which the assets are located.
USA
UK
Rest of the World
Sub total
Unallocated amounts
Total
The unallocated amounts on non-current assets relate to deferred tax assets.
Sales
revenue
Year ended
2021
£m
Sales
revenue
Year ended
2020
£m
Segment
non-current
assets
Year ended
2021
£m
Segment
non-current
assets
Year ended
2020
£m
316.4
105.0
237.3
658.7
–
658.7
367.4
121.8
244.4
733.6
–
733.6
202.5
181.8
140.9
525.2
5.7
530.9
239.7
159.3
151.5
550.5
4.7
555.2
128
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
FINANCIAL STATEMENTS 5. Operating profit
Operating profit/(loss) can be analysed as follows:
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Profit on sale of fixed assets
Share of joint venture profit
Operating profit/(loss)
Operating profit/(loss) for the period has been arrived at after charging:
Net foreign exchange (gains)/losses
Research and design costs
Depreciation of property, plant and equipment
Amortisation of intangible assets included in administration expenses
Cost of inventories recognised as expense
Provision for loss allowance against receivables
Restructuring: provision for impairment of property, plant and equipment and inventories
Restructuring: staff and other costs
COVID-19 grant (income)
Aerospace manufacturing grant (income)
Year ended
2021
£m
Year ended
2020
£m
658.7
(555.7)
103.0
(5.4)
(87.3)
–
0.2
10.5
733.6
(628.3)
105.3
(4.6)
(278.3)
0.1
0.2
(177.3)
Year ended
2021
£m
Year ended
2020
£m
(1.7)
19.2
46.3
1.5
555.7
0.6
2.3
2.5
(0.3)
(4.2)
3.1
18.7
52.1
9.5
628.3
0.7
17.3
21.2
(9.0)
–
Staff costs are disclosed in Note 6. The majority of research and design costs incurred during the year have been expensed in line with Note 2 Group’s
accounting policies. In 2021, government assistance schemes in response to the COVID-19 pandemic have benefitted the Group through £0.3m
grant income (2020 – £9.0m grant income), to compensate for furloughing of employees, and have £2.4m of deferral of social security tax payments,
which is due for payment in 2022.
The analysis of the Auditor’s remuneration is as follows:
Fees payable to the Company’s Auditor and their associates for the audit of the Company’s annual accounts
Fees payable to the Company’s Auditor and their associates for other services to the Group
– The audit of the Company’s subsidiaries
Total audit fees
Year ended
2021
£m
Year ended
2020
£m
0.3
1.5
1.8
0.2
1.3
1.5
Fees payable to Company’s Auditor and their associates for non-audit services to the Company are not required to be disclosed because the
Consolidated Financial Statements are required to disclose such fees on a consolidated basis.
The Group paid £0.06m (2020 – £0.09m) to the Company’s Auditor for audit related services and £0.1m (2020 – £nil) for non-audit related services
during 2021, in line with the Company’s policy on the use of Auditors for non-audit services.
Details of the Company’s policy on the use of auditors for non-audit services, the reasons why the Auditor was used rather than another supplier and
how the Auditor’s independence and objectivity were safeguarded are set out in the Audit Committee Report on pages 80 to 86. No services were
provided pursuant to contingent fee arrangements.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
129
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
6. Staff costs
The average monthly number of employees (including Directors) was:
Production
Distribution
Sales
Administration
Total
The actual number of employees at 31 December 2021 was 5,664 (2020 – 5,880).
Their aggregate remuneration comprised:
Wages and salaries
Social security costs
Termination benefits
Other pension costs – defined contribution
Other pension costs – defined benefit
Share based payments
Aggregate remuneration
Year ended
2021
£m
Year ended
2020
£m
4,850
63
252
473
5,638
5,713
72
285
564
6,634
Year ended
2021
£m
Year ended
2020
£m
Notes
198.9
22.6
1.0
8.6
0.7
3.5
235.3
225.6
25.3
19.1
9.2
0.9
3.0
283.1
34a
34e
33
The Group also incurred medical and other employee benefit expenses during the year of £20.9m (2020 – £25.0m) and received £0.3m
(2020 – £9.0m) COVID-19 grant income related to government assistance schemes to compensate for furloughing of employees.
7. Investment income
Interest on bank deposits
Net finance income of retirement benefits (Note 34e)
Total income
8. Finance costs
Interest on bank overdrafts and loans
Interest on other loans and other finance costs
Interest on lease liabilities
Total finance costs
Year ended
2021
£m
Year ended
2020
£m
0.1
0.4
0.5
0.2
0.9
1.1
Year ended
2021
£m
Year ended
2020
£m
1.0
4.9
2.6
8.5
1.9
6.1
3.0
11.0
9. Adjusted operating profit and adjusted loss before tax
The presentation of adjusted operating profit and adjusted loss before tax measures, derived in accordance with the table below, have been included
to identify the performance of the Group prior to the impact of amortisation of intangible assets from acquisitions, goodwill impairment and write-off,
net restructuring income/cost and the income and costs associated with corporate undertakings. The Board has adopted a policy to separately
disclose those items, where significant in size, that it considers are outside the results for the particular year under review and against which the
Board measures and assesses the performance of the business.
COVID-19 introduced unprecedented challenges and economic disruption. This has directly impacted the business performance of both the
Aerospace and Flexonics Divisions. The Board has not changed the policy for adjusted measures to present the COVID-19 financial impact,
but instead, have described the impact within the narrative sections of the Strategic Report.
The adjustments are made on a consistent basis and also reflect how the business is managed on a day-to-day basis.
The amortisation charge relates to prior years’ acquisitions. It is charged on a straight-line basis and reflects a non-cash item for the reported year.
Goodwill impairment related to the Aerostructures group of cash generating units (CGU group), reflecting the significant impact of the COVID-19
pandemic on the civil aerospace sector, where there has been a significant reduction in the short-term demand for new aircraft on existing
programmes. Goodwill write-offs related to operating business closures. The Group implemented a restructuring programme in 2019 which was
expanded further in 2020 and 2021 in response to the impact of COVID-19 on some of the Group’s end markets. The aerospace manufacturing grant,
within net restructuring income, represents incentives specific to only part of the Group for a limited time period. Corporate undertakings relate to
gain on disposal of a business, bid defence and other costs relating to corporate activities and are exceptional in nature, being presented outside
the normal operating results of the Group. None of these charges are reflective of in-year performance. They are therefore excluded by the Board
and Executive Committee when measuring the performance of the businesses.
130
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
FINANCIAL STATEMENTS 9. Adjusted operating profit and adjusted loss before tax continued
Operating profit/(loss)
Amortisation of intangible assets from acquisitions
Goodwill impairment and write-off
Net restructuring (income)/cost
Adjusted operating profit
Profit/(loss) before tax
Adjustments to profit/loss before tax as above
Corporate undertakings
Adjusted loss before tax
Year ended
2021
£m
Year ended
2020
£m
Notes
13
31
10.5
–
–
(4.4)
6.1
23.7
(4.4)
(21.2)
(1.9)
(177.3)
7.7
134.3
39.0
3.7
(191.8)
181.0
4.6
(6.2)
Goodwill impairment and write-off
As previously reported, during the first half of 2020, an impairment loss of £110.5m was recognised in relation to the goodwill allocated to the
Aerostructures CGU group (now within Aerospace CGU group – see Note 13 for details). This reflected the significant impact of COVID-19 on the
short to medium-term outlook for Aerostructures, given the end market, which is focused on the civil aerospace sector. In the second half of 2020,
write-offs of £1.6m and £22.2m were recognised in respect of the closures of Senior Aerospace Bosman and Senior Flexonics Upeca.
Net restructuring income/cost
The Group focused on taking actions to conserve cash to manage through the pandemic, including curtailing capital expenditure, tightly managing
working capital and implementing further cost cutting actions. At 31 December 2021, none of the Group’s employees were on furlough (2020 – 7%).
The decisive actions taken on restructuring and cost management over the last couple of years has delivered the expected benefits. In addition, the
Group has continued to review inventory and asset exposures on programmes that have been reduced, cancelled or where the Group will no longer
participate. As part of the restructuring focus, we have assessed critically any inventory or asset exposures on these programmes and written down
the carrying values on excess holdings and assets where there is no alternate use. Where demand has picked up on previously reduced or cancelled
programmes, inventory impairments have been reversed to the extent that there are confirmed orders in place. Our operating businesses have also
worked hard to maximise cash realised from disposal of assets where there is no alternate use.
The restructuring, which involves business closures and sale of associated assets, headcount reductions and other benefits, has resulted in net
income of £4.4m (2020 – £39.0m net cost). Of this, £4.2m income (2020 – £nil) related to an aerospace manufacturing grant, £1.0m net income for
closures of Senior Flexonics Upeca and Senior Aerospace Bosman (2020 – £10.5m cost), £0.4m cost related to headcount reduction (2020 – £13.5m
cost) and £1.0m cost related to consultancy and other activities (2020 – £1.5m cost). For certain specific programmes, and in conjunction with the
focus on restructuring, management has also identified inventory impairment reversals of £1.4m (2020 – £8.5m charge) where customer demand
has increased, and further impairment provisions on property, plant and equipment in 2021 with a charge of £0.8m (2020 – £5.0m charge) to cover
the risk where there are no alternative uses and in part due to customers choosing to cancel and/or significantly reduce future build rates.
Net cash outflow related to restructuring activities was £0.9m (2020 – £15.2m). At 31 December 2021, a restructuring provision of £1.3m
(31 December 2020 – £8.9m) was recognised and is expected to be utilised in 2022.
Corporate undertakings
Net income associated with corporate undertakings was £21.2m in 2021, of which £24.2m gain relates to the disposal of Senior Aerospace
Connecticut in April 2021, partly offset by £3.0m bid defence and costs relating to other corporate activities. In 2020, costs of £4.6m were incurred
relating to employee costs and external professional fees for the potential divestment of the Aerostructures business. See Note 31 to the Financial
Statements for further details on the £24.2m gain on disposal.
10. Taxation
Current tax:
Current year
Adjustments in respect of prior periods
Deferred tax (Note 21):
Current year
Adjustments in respect of prior periods
Total tax credit
Year ended
2021
£m
Year ended
2020
£m
7.0
(6.0)
1.0
(1.7)
0.2
(1.5)
(0.5)
3.1
(6.0)
(2.9)
(31.3)
0.9
(30.4)
(33.3)
On 24th May 2021, a future increase in UK corporation tax rate from 19% to 25% was substantially enacted with an effective date of 1 April 2023.
Deferred tax assets and liabilities are measured at the rates that are expected to apply to the year when the asset is realised or the liability is settled,
based on tax rates (and tax laws) that have been enacted or substantially enacted at the Balance Sheet date. The impact of the tax rate change to 25%
on deferred tax assets and liabilities has been reflected at the Balance Sheet date and this has resulted in net deferred tax liabilities being increased by
£2.1m with a credit of £0.6m recognised through the Income Statement and a charge of £2.7m through Other Comprehensive Income. Taxation for
other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
131
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
10. Taxation continued
The total charge for the year can be reconciled to the loss/profit before tax per the Consolidated Income Statement as follows:
Profit/(Loss) before tax
Expected tax charge/(credit) at the UK standard corporation tax rate 19%
Non-tax deductible goodwill impairments and write-offs
Effect of different statutory rates in overseas jurisdictions
Tax incentives and credits
Tax losses not recognised
Impact of share options
Effect of difference in treatment of financing activities between jurisdictions
Non-tax deductible expenses and other permanent differences
Effect of changes in UK tax rate on deferred tax items
Withholding taxes
Adjustments in respect of prior periods – current tax items
Adjustments in respect of prior periods – deferred tax items
Tax credit and effective tax rate for the year
Year ended
2021
£m
Year ended
2021
%
Year ended
2020
£m
Year ended
2020
%
a
b
c
d
e
f
g
h
i
j
k
23.7
4.5
-
0.9
(1.1)
0.3
0.1
(0.3)
1.4
(0.6)
0.1
(6.0)
0.2
(0.5)
(191.8)
(36.4)
12.7
(10.9)
–
3.0
0.4
(0.3)
2.7
0.4
0.2
(6.0)
0.9
(33.3)
2.1%
(17.4%)
a. Goodwill impairments and write-offs on which no tax relief is available or deferred tax liability was held.
b. Mainly attributable to a higher rate of tax in the US.
c.
Includes a £1.0m benefit from enhanced US R&D deductions and the UK capital allowance superdeduction as well as the benefit from specific projects eligible for tax incentives.
In 2020 the benefit of enhanced deductions was fully offset by losses on projects subject to tax incentives which gave rise to a permanent difference.
d. Tax losses not recognised comprise £0.5m of State tax losses in the US which have restricted use, net of tax losses utilised of £0.2m. Tax losses not recognised in 2020 mainly
related to Senior Aerospace Bosman and Senior Flexonics Upeca whose trades have ceased.
e. Impact of non-tax deductible share based payment charges net of current tax deductions for share exercises in the year and the deferred tax asset recognition for future exercises.
f.
Effect of different rates of tax between jurisdictions on internal financing activities.
g. Includes £1.5m in respect of non-tax deductible expenditure, the impact of minimum taxation rules in the US and a £2.0m charge in respect of uncertain tax positions. This is
reduced by the benefit of non-taxable foreign exchange gains recycled to the Income Statement of £1.6m and other non-taxable gains on disposals.
h. Relates to the Income Statement impact of the retranslation of UK deferred tax assets and liabilities following the substantial enactment of the future 25% tax rate during the year.
i.
j.
Arises from irrecoverable withholding taxes.
Includes a credit in respect of the uncertain tax positions which have been been resolved, settled or released in accordance with IFRIC 23 principles of £5.1m as well as prior
year items arising from the true up of tax accruals following the submission of local tax filings which in many cases have an equal and opposite prior year item in deferred tax.
k.
Arises from the true up of tax positions following the submission of tax returns.
In addition to the amount charged to the Consolidated Income Statement, the following amounts relating to tax have been recognised directly in other
comprehensive income:
Deferred tax:
Items that will not be reclassified subsequently to profit and loss
Tax on actuarial items
Effect of change in UK tax rate
Items that may be reclassified subsequently to profit or loss
Tax on foreign exchange contracts – cash flow hedges
Total tax (charge)/credit recognised directly in other comprehensive income
2021
£m
2020
£m
(3.7)
(2.7)
0.8
(5.6)
1.6
–
(0.5)
1.1
In addition to the amount charged to the Consolidated Income Statement and Other Comprehensive Income, the following amounts relating to tax
have been recognised directly in equity:
Deferred tax:
Excess tax deductions related to share-based payments in exercised options
Total tax credit recognised directly in equity
Deferred tax (Note 21)
132
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
Year ended
2021
£m
Year ended
2020
£m
0.1
0.1
–
–
(5.5)
1.1
FINANCIAL STATEMENTS 11. Dividends
Amounts recognised as distributions to equity holders in the period:
Final dividend for the year ended 31 December 2020 of £nil (2019 – £nil) per share
Interim dividend for the year ended 31 December 2021 of £nil (2020 – £nil) per share
Proposed final dividend for the year ended 31 December 2021 of £nil (2020 – £nil) per share
12. Earnings/loss per share
The calculation of the basic and diluted earnings/loss per share is based on the following data:
Number of shares
Weighted average number of ordinary shares for the purposes of basic earnings/loss per share
Effect of dilutive potential ordinary shares:
Share options
Weighted average number of ordinary shares for the purposes of diluted earnings/loss per share
Year ended
2021
£m
Year ended
2020
£m
–
–
–
–
–
–
–
–
Year ended
2021
£m
Year ended
2020
£m
415.7
414.9
6.8
422.5
–
414.9
Earnings/loss and earnings/loss per share
Profit/(loss) for the period
Adjust:
Amortisation of intangible assets from acquisitions net of
tax of £nil (2020 – £2.0m)
Goodwill Impairment and write-off net of tax of £nil (2020 – £21.7m)
Net restructuring (income)/cost and tax credit of £0.2m (2020 – £6.5m)
Corporate undertakings net of tax of £2.9m (2020 – £0.4m)
Non-cash tax credit
Adjusted earnings/(loss) after tax
Earnings/(loss) per share
– basic
– diluted
– adjusted
– adjusted and diluted
Year ended 2021
Year ended 2020
Notes
Earnings
£m
24.2
EPS
pence
5.82
Loss
£m
EPS
pence
(158.5)
(38.20)
9
9
31
10
–
–
(4.6)
(18.3)
(0.6)
0.7
–
–
(1.11)
(4.40)
(0.14)
0.17
5.82p
5.73p
0.17p
0.17p
5.7
112.6
32.5
4.2
–
(3.5)
1.38
27.14
7.83
1.01
–
(0.84)
(38.20)p
(38.20)p
(0.84)p
(0.84)p
The denominators used for all basic, diluted and adjusted earnings/loss per share are as detailed in the table above.
The presentation of adjusted earnings/loss per share, derived in accordance with the table above, has been included to identify the performance of
the Group prior to the impact of amortisation of intangible assets from acquisitions, goodwill impairment and write-off, net restructuring income/cost,
corporate undertakings and non-cash tax credit. The Board has adopted a policy to separately disclose those items, where significant in size, that it
considers are outside the earnings/loss for the particular year under review and against which the Board measures and assesses the performance
of the business. See Note 9 for further details.
13. Goodwill
Cost
At 1 January
Corporate undertakings and write-off
Exchange differences
At 31 December
Accumulated impairment losses
At 1 January
Impairment
Exchange differences
At 31 December
Carrying amount at 31 December
Year ended
2021
£m
Year ended
2020
£m
322.9
(15.1)
0.7
308.5
157.9
–
0.4
158.3
150.2
343.9
(23.8)
2.8
322.9
46.8
110.5
0.6
157.9
165.0
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
133
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
13. Goodwill continued
In 2021, goodwill has reduced by £14.8m, of which £15.1m relates to the disposal of Senior Aerospace Connecticut, partly offset by £0.3m foreign
exchange differences.
In the first half of 2020, the COVID-19 pandemic had direct impact on the Group’s end markets which led to an impairment triggering event.
Following a rigorous assessment, the Board concluded that Aerostructures CGU group (subsequently combined with Aerospace Fluid systems into
the Aerospace CGU group) recoverable amount fell below the carrying value by £110.5m, and this impairment was recorded in the half year ended
30 June 2020. In the second half of 2020, write-offs of £1.6m and £22.2m were recognised in respect of the closures of Senior Aerospace Bosman
and Senior Flexonics Upeca.
Goodwill is allocated to the group of CGUs (CGU groups) within Aerospace and Flexonics, reflecting the lowest level at which management exercises
oversight and monitors the Group’s performance. The table below highlights the carrying amount of goodwill allocated to these CGU groups, all of
which are considered significant in comparison with the total carrying amount of goodwill.
Aerospace
Flexonics
Total
Year ended
2021
£m
Year ended
2020
£m
98.0
52.2
150.2
113.3
51.7
165.0
The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired. The timing of the annual
assessment at 30 September 2021 coincided with the Board’s review of the most recent financial strategy. Management applied the value in use
methodology to assess impairment. The key assumptions on which the value in use calculations were based relate to business performance over the
next five years, long-term growth rates beyond 2026 and the discount rates applied. The discount rates were pre-tax measures based on the rate of
10-year government bonds issued in the relevant market and in the same currency as the cash flows, adjusted for a risk premium to reflect both the
increased risk of investing in equities generally and the systematic risk of the CGU group. The key estimates were the level of revenue and operating
margins anticipated and the proportion of operating profit converted into cash flow in each year. The forecast compound annual growth rate in revenue
from 2021 to 2026 was 9% (2020 – 2019 to 2025 was – 1% to 4%), reflecting some market recovery post COVID-19 pandemic.
Forecasts used in the cash flow were based on the most recent financial strategy, as approved by Management for the next five years to 2026. These
estimates up to 2026, where appropriate, take account of the current economic environment as set out in the Strategic Report on pages 1 to 64.
Cash flows after 2026 have been extrapolated based on estimated long-term growth rates into perpetuity, which has been determined by the lower
of the long-term market growth rates and the historical forecast compound annual growth in revenue to 2026. For Aerospace, the long-term market
growth rate is 3.0% per annum (2020 – 3.0%), which does not exceed the long-term average growth rate forecast for the aerospace market as
included in market outlooks from Boeing and Airbus. For Flexonics, the long-term market growth rate is 1.4% per annum (2020 – 1.5%), which is
based on the world long-term forecast GDP growth for advanced economies.
The pre-tax discount rates applied to discount the pre-tax cash flows for Aerospace and Flexonics are 10.7% and 11.8% respectively (2020 – 10.5%
and 12.1%; these discount rates include CGU group specific risk adjustments) which are the measurements used by Management in assessing
investment appraisals specific to each CGU group.
Sensitivities reflecting reasonable possible changes have also been considered for each CGU group in relation to the value in use calculations: the
long-term growth rate assumption was reduced to 1 percentage point and the discount rate was increased by a 1 percentage point. This did not result
in the carrying amount of the CGU groups exceeding their recoverable amount.
Further to the 30 September 2021 annual impairment test, the Board considered whether there were any triggering events as at the 31 December
2021 reporting date. The Board concluded that the market factors considered as at 30 September were largely unchanged and remained relevant for
the year end reporting date, with no new triggers identified for impairment.
134
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
FINANCIAL STATEMENTS 14. Other intangible assets
Cost
At 1 January
Additions
Disposals
Restructuring impairment and disposal
Exchange differences
At 31 December
Amortisation
At 1 January
Charge for the year
Disposals
Restructuring impairment and disposal
Exchange differences
At 31 December
Carrying amount at 31 December
Intangible
assets
from
acquisitions
Year ended
2021
£m
Computer
software
and others
Year ended
2021
£m
Total
Year ended
2021
£m
Intangible
assets
from
acquisitions
Year ended
2020
£m
Computer
software
and others
Year ended
2020
£m
Total
Year ended
2020
£m
121.0
–
(3.5)
–
–
117.5
121.0
–
(3.5)
–
–
117.5
–
23.0
1.1
(0.6)
(0.6)
(0.1)
22.8
18.2
1.5
(0.6)
(0.6)
0.1
18.6
4.2
144.0
1.1
(4.1)
(0.6)
(0.1)
140.3
139.2
1.5
(4.1)
(0.6)
0.1
136.1
4.2
131.0
–
–
(7.9)
(2.1)
121.0
123.5
7.7
–
(7.9)
(2.3)
121.0
–
21.8
1.6
(0.1)
–
(0.3)
23.0
16.4
1.8
(0.1)
0.3
(0.2)
18.2
4.8
152.8
1.6
(0.1)
(7.9)
(2.4)
144.0
139.9
9.5
(0.1)
(7.6)
(2.5)
139.2
4.8
15. Investment in joint venture
The Group has a 49% interest in Senior Flexonics Technologies (Wuhan) Limited, a jointly controlled entity incorporated in China, which was set up
in 2012. Senior Flexonics Technologies (Wuhan) Limited is a precision manufacturer of automotive components.
The results of the joint venture are accounted for using equity accounting.
The Group’s investment of £3.9m represents the Group’s share of the joint venture’s net assets as at 31 December 2021 (2020 – £3.6m).
The following amounts represent the aggregate amounts relating to the revenue and expenses and assets and liabilities of Senior Flexonics
Technologies (Wuhan) Limited for the years ended 31 December 2021 and December 2020.
Revenue
Expenses
Profit
Total assets
Total liabilities
Net assets
Group's share of profit
Group's share of net assets
2021
£m
6.6
(6.1)
0.5
10.0
(2.0)
8.0
0.2
3.9
2020
£m
5.7
(5.2)
0.5
9.3
(1.9)
7.4
0.2
3.6
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
135
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
16. Property, plant and equipment
Freehold
land and
buildings
Year ended
2021
£m
Leasehold
building
improve-
ments
Year ended
2021
£m
Plant
and
equipment
Year ended
2021
£m
Right-of-
use
Land and
Buildings
Year
ended
2021
£m
Right-of-
use
Plant and
equipment
Year ended
2021
£m
Freehold
land and
buildings
Year ended
2020
£m
Leasehold
building
improve-
ments
Year ended
2020
£m
Plant
and
equipment
Year ended
2020
£m
Right-of-
use
Land and
Buildings
Year ended
2020
£m
Right-of-
use
Plant and
equipment
Year ended
2020
£m
Total
Year ended
2020
£m
Total
Year ended
2021
£m
Cost or
valuation
At 1 January
Additions
Lease
Modifications
Exchange
differences
Disposed
on disposal
activities
Disposals
Restructuring
impairment and
disposal
At 31 December
Accumulated
depreciation
and impairment
At 1 January
Charge for
the year
Lease
Modifications
Exchange
differences
Eliminated
on disposal
activities
Eliminated on
disposals
Restructuring
impairment and
disposal
At 31 December
Carrying
amount at 31
December
111.7
0.3
4.2
0.3
536.7
19.6
86.1
0.9
6.2
1.1
744.9
22.2
112.3
0.8
4.2
0.2
531.8
24.2
86.6
1.4
5.6
1.5
740.5
28.1
–
(1.1)
(3.1)
(0.1)
–
–
–
–
–
3.7
(0.2)
3.5
–
–
–
(0.2)
(0.8)
(1.0)
(5.0)
(0.5)
–
(6.6)
(1.3)
(0.1)
(12.6)
(1.7)
(0.1)
(15.8)
(16.6)
(11.0)
–
(0.4)
–
(0.2)
(19.7)
(11.7)
–
(0.1)
–
(0.1)
–
(5.6)
–
–
–
–
–
(5.8)
(3.1)
104.6
–
4.5
(4.9)
518.8
(1.6)
88.2
(0.4)
6.5
(10.0)
722.6
–
111.7
–
4.2
(1.1)
536.7
–
86.1
–
6.2
(1.1)
744.9
35.8
3.2
355.6
16.8
3.0
414.4
32.4
3.2
325.7
8.3
1.6
371.2
2.5
0.3
34.0
8.1
1.4
46.3
3.0
0.2
38.7
8.7
1.5
52.1
–
(0.3)
(0.9)
(0.1)
–
–
–
–
–
–
(0.1)
(0.1)
–
–
–
–
–
–
(2.3)
(0.1)
–
(2.7)
(0.2)
(0.1)
(9.1)
(0.5)
(0.2)
(10.1)
(11.3)
–
–
(12.2)
–
–
–
(10.8)
(0.4)
(0.2)
(11.5)
(0.1)
(0.1)
(5.2)
–
–
–
–
–
(5.4)
(0.7)
36.3
–
3.5
(4.3)
360.9
(0.8)
23.6
(0.4)
3.7
(6.2)
428.0
0.7
35.8
–
3.2
5.5
355.6
0.3
16.8
0.1
3.0
6.6
414.4
68.3
1.0
157.9
64.6
2.8
294.6
75.9
1.0
181.1
69.3
3.2
330.5
In conjunction with the focus on restructuring described in Note 9, £3.8m (2020 – £7.7m) of property, plant and equipment has been impaired in 2021,
of which £1.0m relates to Aerospace and £2.8m relates to Flexonics. The recoverable amount of the assets was determined based on value-in-use for
assets with confirmed orders, or fair value less costs to sell, where assets are to be disposed.
At 31 December 2021, the Group had entered into contractual commitments for the acquisition of property, plant and equipment amounting to £3.4m
(2020 – £1.9m)
17. Inventories
Raw materials
Work-in-progress
Finished goods
Total
Year ended
2021
£m
Year ended
2020
£m
56.5
60.1
28.6
145.2
51.1
58.6
37.9
147.6
Inventory write-downs recognised as an expense in 2021 were £2.5m (2020 – £17.3m), after write-down reversals of £1.5m (2020 – £9.3m
write-downs) relating to restructuring (see Note 9).
136
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
FINANCIAL STATEMENTS 18. Trade and other receivables
Trade and other receivables at 31 December comprise the following:
Non-current assets
Other receivables
Current assets
Trade receivables
Value added tax
Foreign exchange contracts
Prepayments
Other receivables
Total trade and other receivables
Year ended
2021
£m
Year ended
2020
£m
0.1
0.1
85.2
1.9
0.8
10.0
0.1
98.0
98.1
0.1
0.1
71.5
1.6
2.9
8.8
0.5
85.3
85.4
Other receivables includes £nil (2020 – £0.3m) of deferred consideration, £nil (2020 – £0.3m) as a current asset and £nil (2020 – £nil) as a
non-current asset.
Credit risk
The Group’s principal financial assets are bank balances and cash and trade receivables. The credit risk on liquid funds and derivative financial
instruments is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies.
The Group’s credit risk is primarily attributable to its trade receivables. The amounts presented in the Consolidated Balance Sheet are net of loss
allowances. There are no other credit or impairment losses for other classes of financial assets.
Further disclosures on credit risk are included in Note 20.
The average credit period taken on sales of goods is 52 days (2020 – 52 days). An allowance has been made for estimated irrecoverable amounts from
the sale of goods of £2.0m (2020 – £1.6m). In determining the recoverability of trade receivables, the Group considers any change in the credit quality
of the trade receivable from the date credit was initially granted up to the reporting date. At 31 December 2021, the carrying amount of the receivable
from the Group’s most significant customer was £6.7m (2020 – £8.3m from the same customer). The Group has no other significant concentration of
credit risk, with exposure spread over a large number of counterparties and customers. Accordingly, the Directors believe that there is no further credit
provision risk in excess of the loss allowance.
Expected credit loss
Movements in loss allowance:
At 1 January
Provision for impairment
Disposal activities
Amounts written off as uncollectible
Amounts recovered
Exchange differences
At 31 December
Ageing analysis of past due, net of loss allowance:
Up to 30 days past due
31 to 60 days past due
61 to 90 days past due
91 to 180 days past due
Total past due, net of loss allowance
Not past due
Total current trade receivables
Year ended
2021
£m
Year ended
2020
£m
1.6
0.6
–
(0.2)
–
–
2.0
9.3
3.2
0.9
1.6
15.0
70.2
85.2
1.5
0.7
–
(0.2)
(0.3)
(0.1)
1.6
8.9
1.4
0.7
0.4
11.4
60.1
71.5
There are no items past due in any other class of financial assets except for trade receivables.
The Directors consider that the carrying amount of trade and other receivables approximates their fair value. The maximum exposure to credit risk at
the reporting date is the fair value of each class of receivable above. The Group does not hold any collateral as security.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
137
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
19. Bank overdrafts and loans
Bank overdrafts
Bank loans
Other loans
The borrowings are repayable as follows:
On demand or within one year
In the second year
In the third to fifth years inclusive
After five years
Less: amount due for settlement within 12 months (shown under current liabilities)
Amount due for settlement after 12 months
Year ended
2021
£m
Year ended
2020
£m
–
(0.5)
131.5
131.0
14.8
–
70.7
45.5
131.0
(14.8)
116.2
0.4
20.9
131.7
153.0
0.4
15.4
90.6
46.6
153.0
(0.4)
152.6
At 31 December 2021, bank loans are undrawn and there are £0.5m of capitalised revolving credit facility transaction costs. At 31 December 2020,
bank loans of £21.7m were drawn, offset by £0.8m of capitalised transaction costs.
Analysis of borrowings by currency
31 December 2021
Bank overdrafts
Bank loans
Other loans
31 December 2020
Bank overdrafts
Bank loans
Other loans
The weighted average interest rates paid were as follows:
Bank loans and overdrafts
Other loans
Total
£m
–
(0.5)
131.5
131.0
Total
£m
0.4
20.9
131.7
153.0
Pound
Sterling
£m
–
(0.5)
26.9
26.4
Pound
Sterling
£m
–
3.7
26.9
30.6
Euros
£m
–
–
23.4
23.4
Euros
£m
0.4
1.8
24.9
27.1
US
Dollars
£m
–
–
81.2
81.2
US
Dollars
£m
–
15.4
79.9
95.3
Year ended
2021
%
Year ended
2020
%
1.51
3.10
1.66
3.08
Bank loans and overdrafts of £nil (2020 – £21.3m) are arranged at floating rates, thus exposing the Group to cash flow interest rate risk. Other
borrowings are mainly arranged at fixed interest rates and expose the Group to fair value interest rate risk. No interest rate swaps were taken out in
2020 or 2021.
138
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
FINANCIAL STATEMENTS 19. Bank overdrafts and loans continued
The Directors estimate the fair value of the Group’s borrowings to be as follows:
Bank loans and overdrafts
Other loans
Year ended
2021
£m
Year ended
2020
£m
(0.5)
133.8
133.3
21.3
131.9
153.2
The fair value of Other loans has been determined by applying a make-whole calculation using the prevailing treasury bill yields plus the applicable
credit spread for the Group (level 2 of the fair value hierarchy as defined in Note 20).
The other principal features of the Group’s borrowings are as follows:
Bank overdrafts are repayable on demand. The effective interest rates on bank overdrafts are determined based on appropriate LIBOR and SONIA
rates plus applicable margins.
The Group’s main loans are unsecured guaranteed loan notes in the US private placement market and revolving credit facilities.
a)
b)
c)
Loan notes of €28m, 2021 £23.5m (2020 – £25.0m) were taken out in January 2017, carry interest at the rate of 1.51% and mature on
1 February 2027.
Loan notes of $20m, 2021 £14.8m (2020 – £14.6m) were taken out in October 2015 and are due for repayment in October 2022. The loan notes
carry interest at the rate of 3.42% per annum.
Loan notes of $60m, 2021 £44.5m (2020 – £43.8m) were taken out in October 2015 and are due for repayment in October 2025. The loan notes
carry interest at the rate of 3.75% per annum.
d)
Loan notes of £27m were drawn down in January 2018, carry interest at a rate of 2.35% and are due for repayment in January 2025.
e)
Loan notes of $30m, 2021 £22.2m (2020 – £21.9m) were taken out in September 2018, carry interest at the rate of 4.18% and are due for
repayment in September 2028.
Transaction costs of £0.5m, directly attributable to the GBP notes (£0.1m), the Euro notes (£0.1m) and the US Dollar notes (£0.3m), have been
deducted from their carrying value.
The Group also has two revolving credit facilities.
A committed multi-currency revolving credit facility in the UK of £120m (2020 – £120m) which matures in February 2024. At 31 December 2020,
£20.9m was outstanding under the £120m facility, comprising £4.5m, $20m (£14.6m) and €2.0m (£1.8m). At 31 December 2021, £nil was drawn
under the £120m facility.
A committed $50m single bank (£37.0m) loans and letter of credit facility was amended in April 2021 and matures in June 2023. There were $nil (£nil)
loans drawn under the facility on 31 December 2021 and $1.1m (£0.8m) loans drawn on 31 December 2020 and there were letters of outstanding
credit of $1.5m (£1.1m) (2020 – £2.3m).
As at 31 December 2021, the Group had available £155.9m (2020 – £132.5m) of undrawn committed borrowing facilities in respect of which all
conditions precedent had been met. The weighted average maturity of the Group’s committed facilities at 31 December is 3.0 years (2020 – 3.8 years).
20. Financial instruments
Capital risk management
The Group manages its capital structure to safeguard its ability to continue as a going concern whilst maximising the return to stakeholders through
the optimisation of the balance between debt and equity. In considering the appropriate level of net debt, the Group pays close attention to its level
as compared to the cash generation potential of the Group, measured by EBITDA (defined in the Notes to the Financial Headlines). The Group
also monitors capital on the basis of a gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is derived in Note 32c.
Lease liabilities are excluded from net debt in calculating the gearing ratio. Total capital is the equity shown in the Consolidated Balance Sheet.
The Group’s strategy in respect of gearing is to target a long-term gearing ratio within the range of 30% to 60%. The gearing ratio for the Group at the
end of 2021 was 19% (2020 – 33%).
All of the Group’s external borrowing facilities at 31 December 2021 have a requirement for the ratio of net debt to EBITDA to be less than 3.0x (US
Private Placements) or 3.5x (UK RCF and US RCF). The adoption of IFRS 16 does not impact the Group’s lending covenants as these are currently
based on frozen GAAP, hence figures quoted below exclude the impact of IFRS 16 on net debt, interest and EBITDA. As required by the covenant
definition, net debt is restated using 12-month average exchange rates (consistent with EBITDA definition).
The Group has two existing covenants (“Existing Covenants”) for committed borrowing facilities, which are tested at June and December: the Group’s
net debt to EBITDA (defined in the Notes to the Financial Headlines) must not exceed 3.0x and interest cover, the ratio of EBITDA to interest must be
higher than 3.5x. The Group’s lenders, both banks and US private placement investors, have been supportive and we agreed covenant relaxations
(“New Covenants”) in relation to the June 2020, December 2020, June 2021 and December 2021 testing periods and agreed an additional September
2021 testing period to provide financial flexibility for the Group through this unprecedented period.
For the testing period ended 31 December 2021, the New Covenants required the Group’s net debt to EBITDA must not exceed 4.5x, interest cover
must be higher than 3.5x and liquidity headroom must be higher than £40.0m. At 31 December 2021, the Group’s net debt to EBITDA was 1.9x
(31 December 2020 – 2.8x) and interest cover was 7.3x (31 December 2020 – 6.1x), both comfortably within the Existing (and New) Covenants limits.
The Group’s liquidity headroom at £208.0m (31 December 2020 – £157.1m) was also comfortably within covenant limits.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
139
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
20. Financial instruments continued
Financial risk management
The Group’s activities expose it to a variety of financial risks including foreign exchange risk, interest rate risk, credit risk and liquidity risk. The Group’s
overall treasury risk management programme focuses on the unpredictability of financial markets, and seeks to minimise potential adverse effects on
the Group’s financial performance.
The Group uses derivative financial instruments to hedge certain risk exposures. The use of financial derivatives is governed by the Group’s policies
approved by the Board, which provide written principles on foreign exchange risk, interest rate risk, credit risk, the use of financial derivatives and
non-derivative financial instruments, and the investment of excess liquidity. Compliance with policies and exposure limits is reviewed by the Group’s
Treasury Committee on a regular basis. The Group does not enter into or trade financial instruments, including derivative financial instruments,
for speculative purposes.
Foreign exchange risk management
The Group enters into forward foreign exchange contracts to hedge the exchange risk arising on the operations’ trading activities in foreign currencies.
Where commented on below, the sensitivity analysis of the Group’s exposure to foreign currency risk at the reporting date has been determined based
on the change taking place at the beginning of the financial year and left unchanged throughout the reporting period, with all other variables held
constant (such as interest rates). The sensitivity assumptions are based on analysis reviewed by the Group’s Treasury Committee.
Translation risk
The Group derived 85% of its revenue from businesses outside the United Kingdom, with 60% relating to operations in North America. Fluctuations
in the value of the US Dollar and other currencies in relation to Pound Sterling have had, and may continue to have, a significant impact on the results
of the Group’s operations when reported in Pound Sterling. The Group decided not to hedge this translation risk. In addition, the majority of assets are
denominated in foreign currency, particularly in US Dollars. In order to provide a hedge against volatility in the value of these assets compared to the
Group’s loss/earnings, and hence provide a natural hedge against the Group’s principal lending covenant (the ratio of net debt to EBITDA), the Group
aims to borrow in foreign currencies in similar proportions to its generation of foreign currency EBITDA, where practical and economic. A 10%
appreciation (or depreciation) of all other currencies against the Pound Sterling would have increased (or decreased) 2021 Group adjusted operating
profit by £1.9m (£1.0m of which would have been due to the US Dollar movement) and would have increased (or decreased) equity by £26.7m
(£15.1m of which would have been due to the US Dollar movement).
Transaction risk
The Group has a number of transaction-related foreign currency exposures, particularly between the US Dollar and the Pound Sterling, Thai Baht and
Malaysian Ringgit. The Group seeks to layer in hedges within policy guardrails up to 100% of transaction-related exposures mainly on a rolling 15 to
18-month forward basis, but in some cases for periods of up to 60 months and applies hedge accounting where the forwards can be designated in a
qualifying cash flow hedge relationship. Based on the net of the annual sales and purchase-related exposures, all transaction-related foreign currency
exposures to Group profit after hedging in existence at 31 December 2021 are immaterial. The impact on equity is determined by the unrecognised
portion of open forward contracts at the year-end. A 10% appreciation (or depreciation) of the US Dollar against the Pound Sterling, Thai Baht and the
Malaysian Ringgit would have decreased (or increased) equity by £7.7m, £1.6m and £1.3m, respectively.
Interest rate risk management
The Group has a policy of maintaining approximately 60% of its borrowing costs at fixed interest rates. The Group generally borrows long-term in
fixed rates but at times may borrow at floating rates and swap into fixed depending on credit market conditions. Occasionally a portion of fixed debt
interest is swapped into floating rates. The combination of maintaining an acceptable balance of fixed and floating rate debt, and the Group’s policy of
borrowing in foreign currency in proportion to its generation of foreign currency earnings, provides an effective hedge against the impact of interest
rate and foreign currency volatility on total interest costs. As at year end 2021, the percentage of debt at fixed interest was 100% (2020 – 90%),
excluding IFRS 16 lease liabilities from debt.
The following sensitivity analysis of the Group’s exposure to interest rate risk in 2021 has been retrospectively determined based on the exposure
to applicable interest rates on financial assets and liabilities held throughout the financial year, with all other variables held constant (such as foreign
exchange rates). The sensitivity assumptions are based on analysis reviewed by the Group’s Treasury Committee. If variable interest rates had been
0.5% lower (or higher), the Group’s profit before tax would have increased (or decreased) by £0.1m. Any fixed interest debt is held to maturity and not
fair value adjusted through the Consolidated Income Statement. An increase (or decrease) of 0.5% in the market interest rate for the fixed rate debt
held up to maturity would have decreased (or increased) the fair value of the Group’s borrowings by £2.5m. The Group’s sensitivity to interest rates
has remained broadly consistent with prior period due to the high proportion of fixed debt.
Credit risk management
The Group’s credit risk is primarily attributable to its trade receivables. The credit quality of customers is assessed taking into account their financial
position, past experience and other factors. Further details on determining the recoverability of trade receivables is provided in Note 18. The Group
is guarantor under five leases in the UK, three of which arose on the disposal of a former Group-owned subsidiary. Credit risk on liquid funds and
derivative financial instruments is limited because the counterparties are financial institutions with high credit ratings assigned by international credit
rating agencies. The carrying amount of financial assets recorded in the Financial Statements, which is net of impairment losses, represents the
Group’s maximum exposure to credit risk.
The Group participates in some non-recourse reverse factoring schemes which are arranged by customers. These are a form of non-recourse factoring
that are common practice within the aerospace sector and with large customers in the Flexonics Division. In a reverse factoring scheme, a financial
counterparty commits to pay supplier invoices ahead of due date in exchange for a discount interest charge. It is a funding solution initiated by the
customer to provide the supplier with a low-cost financing arrangement. The Group participates in reverse factoring schemes as a way of reducing
credit risk. The trade receivables reverse factored at 31 December 2021 were £16.8m (2020 – £17.6m). The net impact of reverse factoring on 2021
was a cash outflow in working capital of £0.9m (2020 – £13.3m outflow) and the discount interest presented within other finance costs is a charge
of £0.2m in 2021 (2020 – £0.2m).
140
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
FINANCIAL STATEMENTS 20. Financial instruments continued
Liquidity risk management
Liquidity risk reflects the risk that the Group will have insufficient resources to meet its financial liabilities as they fall due. The Group manages liquidity
risk by maintaining adequate reserves, banking facilities and revolving credit facilities, by continuously monitoring forecast and actual cash flows and
matching the maturity profiles of financial assets and liabilities. Cash flow forecasts are produced monthly, together with appropriate capacity planning
and scenario analysis, to ensure that bank covenant and liquidity targets will be met. The Directors also regularly assess the balance of capital and debt
funding of the Group, as part of a process to satisfy the Group’s long-term strategic funding requirements.
As noted in the Financial Review on pages 60 to 63, the Group is currently in a well-funded position, with supportive lenders and has significant
headroom under its committed borrowing facilities.
Categories of financial instruments
Carrying value of financial assets:
Cash and cash equivalents
Trade receivables
Other receivables
Financial assets at amortised cost
Foreign exchange contracts – cash flow hedges
Foreign exchange contracts – held for trading
Total financial assets
Carrying value of financial liabilities:
Bank overdrafts and loans
Lease liabilities
Trade payables
Other payables
Financial liabilities at amortised cost
Foreign exchange contracts – cash flow hedges
Foreign exchange contracts – held for trading
Total financial liabilities
Undiscounted contractual maturity of financial liabilities at amortised cost:
Amounts payable:
On demand or within one year
In the second to fifth years inclusive
After five years
Less: future finance charges
Financial liabilities at amortised cost
Year ended
2021
£m
Year ended
2020
£m
51.1
85.2
0.2
136.5
0.7
0.1
137.3
131.0
73.2
68.3
54.6
327.1
3.6
–
330.7
152.3
118.8
108.7
379.8
(52.7)
327.1
23.6
71.5
0.6
95.7
2.7
0.2
98.6
153.0
76.5
57.8
49.1
336.4
1.9
0.5
338.8
121.1
125.8
144.8
391.7
(55.3)
336.4
The carrying amount is a reasonable approximation of fair value for the financial assets and liabilities, excluding leases, noted above except for bank
overdrafts and loans, disclosure of which are included within Note 19.
An ageing analysis of trade receivables is disclosed within Note 18.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
141
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
20. Financial instruments continued
Forward foreign exchange contracts
The Group enters into forward foreign exchange contracts to hedge the exchange risk arising on the operation’s trading activities in foreign currencies
in accordance with the Group’s accounting policy as set out in Note 2. At the Balance Sheet date, total notional amounts and fair values of outstanding
forward foreign exchange contracts that the Group have committed are given below:
Notional amounts:
Foreign exchange contracts – cash flow hedges
Foreign exchange contracts – held for trading
Total
Less: amounts maturing within 12 months
Amounts maturing after 12 months
Contractual maturity:
Cash flow hedges balances due within one year:
Outflow
Inflow
Cash flow hedges balances due between one and two years:
Outflow
Inflow
Cash flow hedges balances due between two and five years:
Outflow
Inflow
Held for trading balances due within one year:
Outflow
Inflow
Fair values:
Foreign exchange contracts – cash flow hedges
Foreign exchange contracts – held for trading
Total (liability)/asset
Year ended
2021
£m
Year ended
2020
£m
128.9
4.1
133.0
(79.1)
53.9
118.8
9.4
128.2
(75.0)
53.2
(76.8)
75.2
(64.6)
66.2
(22.4)
22.0
(28.1)
27.3
(32.1)
32.1
(25.7)
25.9
(4.0)
4.1
(9.4)
9.1
(2.9)
0.1
(2.8)
0.8
(0.3)
0.5
These fair values are based on market values of equivalent instruments at the Balance Sheet date, comprising £0.8m (2020 – £2.9m) assets included
in trade and other receivables and £3.6m (2020 – £2.4m) liabilities included in trade and other payables. The fair value of currency derivatives that are
designated and effective as cash flow hedges amounting to £2.6m loss (2020 – £0.8m gain) has been deferred in equity.
Fair values
The following table presents an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels
1–3 based on the degree to which the fair value is observable:
Level 1
Level 2
Level 3
those fair values derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;
those fair values derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
those fair values derived from valuation techniques that include inputs for the asset or liability that are not based on observable market
data (unobservable inputs).
142
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
FINANCIAL STATEMENTS
20. Financial instruments continued
There has not been any transfer of assets or liabilities between levels. There are no non-recurring fair value measurements. Level 2 fair values are
derived from future cash flows, of open forward contracts at 31 December, translated by the difference between contractual rates and observable
forward exchange rates.
31 December 2021
Assets
Foreign exchange contracts – cash flow hedges
Foreign exchange contracts – held for trading
Total assets
Liabilities
Foreign exchange contracts – cash flow hedges
Foreign exchange contracts – held for trading
Total liabilities
31 December 2020
Assets
Foreign exchange contracts – cash flow hedges
Foreign exchange contracts – held for trading
Total assets
Liabilities
Foreign exchange contracts – cash flow hedges
Foreign exchange contracts – held for trading
Total liabilities
Level 1
£m
Level 2
£m
Level 3
£m
–
–
–
–
–
–
0.7
0.1
0.8
3.6
–
3.6
–
–
–
–
–
–
Level 1
£m
Level 2
£m
Level 3
£m
–
–
–
–
–
–
2.7
0.2
2.9
1.9
0.5
2.4
–
–
–
–
–
–
Total
£m
0.7
0.1
0.8
3.6
–
3.6
Total
£m
2.7
0.2
2.9
1.9
0.5
2.4
An amount of £0.1m (2020 – £nil) has been transferred to the Consolidated Income Statement, and is included within operating loss/profit.
Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to ensure
that an economic relationship exists between the hedged item and hedging instrument. The Group enters into hedge relationships where the critical
terms of the hedging instrument match exactly with the terms of the hedged item, and so a qualitative assessment of effectiveness is performed.
If changes in circumstances affect the terms of the hedged item such that the critical terms no longer match exactly with the critical terms of the
hedging instrument, the Group uses the hypothetical derivative method to assess effectiveness.
Ineffectiveness is recognised on a cash flow hedge where the cumulative change in the designated component value of the hedging instrument
exceeds on an absolute basis the change in value of the hedged item attributable to the hedged risk. In hedges of the above foreign exchange
contracts this may arise if the timing of the transaction changes from what was originally estimated.
The hedged forecast transactions denominated in foreign currency are expected to occur at various dates during the next 60 months. Amounts
deferred in equity are recognised in the Consolidated Income Statement in the same period in which the hedged items affect profit or loss, which is
generally within 12 months from the Balance Sheet date.
In 2021 some cash flow hedging relationships were discontinued because forecast foreign currency transactions were no longer highly probable and
no longer expected to occur. Previously accumulated gains or losses on the forward contracts were immediately reclassified to the income statement.
These forward contracts, and the forward contracts entered to unwind the position, that remain at 31 December 2021 are presented in the balance
sheet as held for trading assets.
21. Tax balance sheet
Current tax
The current tax receivable of £2.6m (2020 – £3.0m) includes excess tax paid to tax authorities that is expected to be recovered within 12 months
by way of offset against future tax liabilities or refund.
The majority of the Group’s taxable profits arise in countries, including the US, where the estimated tax liabilities are paid in on-account instalments
during the year to which they relate and are largely paid at the Balance Sheet date. The current tax liability of £14.6m (2020 – £19.8m) includes £1.3m
(2020 – £1.4m) tax due on profits of the current and prior years as well as £16.7m (2020 – £19.5m) provisions for tax uncertainties that represent
amounts expected to be paid but by their nature, there is uncertainty over timing and eventual settlement. Amounts receivable of £3.4m (2020 – £1.1m)
that are considered to have a right of offset against provisions for tax uncertainties are also included within the current tax liability.
The Group recognises provisions for tax items which are considered to have a range of possible tax outcomes and separately accounts for interest that
may be due thereon. The range of reasonably possible outcomes considered by the Board could increase those tax liabilities by £8.6m (2020 – £8.0m).
These uncertainties exist due to a number of factors including differing interpretations of local tax laws and the determination of appropriate arm’s
length pricing in accordance with OECD transfer pricing principles on internal transactions and financing arrangements. In calculating the carrying
amount of provisions, Management estimates the tax which could become payable as a result of differing interpretations and decisions by tax
authorities in respect of transactions and events whose treatment for tax purposes is uncertain. In accordance with IFRIC 23, individual provisions are
established based on an assessment of whether it is the most likely individual outcome, or the expected outcome on a probability basis that is likely
to best reflect the resolution of the uncertainty.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
143
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
21. Tax balance sheet continued
Deferred tax liabilities and assets
The following are the deferred tax liabilities and assets recognised by the Group and movements thereon during the current and prior reporting period:
At 1 January 2020
(Credit)/charge to Consolidated
Income Statement
Charge/(credit) to other
comprehensive income
Balances acquired/disposed
Exchange differences
At 1 January 2021
(Credit)/charge to Consolidated
Income Statement
Charge/(credit) to other
comprehensive income
Charge/(credit) direct to equity
Exchange differences
Liability/(asset) at 31 December 2021
Accelerated
tax
depreciation
£m
Unrealised
FX
gains
£m
Goodwill and
intangible
amortisation
£m
19.4
(0.4)
25.6
(2.3)
–
–
(0.4)
16.7
(3.4)
0.1
–
(0.2)
13.2
0.5
0.5
–
0.1
0.7
(0.3)
(0.8)
–
–
(0.4)
(18.5)
–
–
0.4
7.5
(2.0)
–
–
0.1
5.6
£m
7.2
0.5
(1.6)
–
0.3
6.4
2.8
6.4
–
–
15.6
Retirement
benefits
R&D
tax credits
Tax
losses
£m
(0.2)
Other
temporary
differences
£m
(18.6)
Total
£m
31.1
£m
(1.9)
(4.4)
(3.2)
(3.0)
(30.4)
–
–
0.3
(6.0)
–
–
–
(3.4)
–
–
0.5
(21.1)
(1.1)
–
1.2
0.8
0.3
(1.4)
2.5
(1.5)
–
–
(0.1)
(5.8)
–
–
0.2
(4.6)
(0.1)
(0.1)
–
(18.8)
5.6
(0.1)
–
4.8
Other temporary differences include assets in the US of £13.6m (2020 – £16.1m) in respect of inventory provisions, accruals and other expenses
where tax relief is only available when items are realised or paid. Also included are assets held in respect of IFRS 16 of £1.5m (2020 – £1.1m) and share
based compensation (£1.1m) (2020 – £0.3m).
The deferred tax liability in respect of Retirement benefits relates primarily to the Senior plc UK defined benefit pension plan £18.0m (2020 – £8.8m),
net of deferred tax assets on other schemes.
UK deferred tax assets and liabilities at the Balance Sheet date have been stated at the future rate of UK corporation tax of 25% at which assets are
expected to be realised or liabilities settled. This has resulted in an overall increase in the net deferred tax liability by £2.1m in the year with a £0.6m
credit in the Income Statement and a £2.7m charge through Other Comprehensive Income.
Certain deferred tax assets and liabilities have been offset. The following is the analysis of the deferred tax balances, after offset:
Deferred tax liabilities
Deferred tax assets
Year ended
2021
£m
Year ended
2020
£m
10.5
(5.7)
4.8
5.5
(4.7)
0.8
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available, including those arising from the reversal
of other taxable temporary differences, against which the assets can be utilised.
At the Balance sheet date the Group has recognised deferred tax assets in respect of losses of £4.6m (2020 – £3.4m), including £3.2m (2020 – £2.4m)
recognised against deferred tax liabilities and £1.4m (2020 – £1.0m) recognised based on anticipated profits in the Group’s five year forecast to 2026
as approved by the Board.
Due to uncertainty as to the availability of future profits against which tax losses may be utilised, £23.6m (2020 – £25.8m) of losses have not been
recognised. Included in unrecognised tax losses are losses of £13.8m (2020 – £9.6m) that will expire over a period of one to nine years. Other losses
may be carried forward indefinitely.
At the Balance Sheet date, a deferred tax liability of £0.2m (2020 – £0.1m) has been recognised in respect of the aggregate amount of temporary
differences associated with undistributed earnings of subsidiaries expected to reverse in the foreseeable future. No temporary difference has been
recognised in respect of £34.5m (2020 – £38.7m) of undistributed earnings, which may be subject to a withholding tax, as the Group is in a position
to control the timing of the reversal of the temporary differences and it is not probable that such differences will reverse in the foreseeable future.
At the Balance Sheet date, the Group had £5.0m (2020 – £5.0m) of surplus Advanced Corporation Tax (‘ACT’), previously written off, for which no
deferred tax asset has been recognised as it is unlikely to be recovered in the foreseeable future due to the UK earnings profile. The Group also has
£18.0m (2020 – £18.0m) of unused capital losses.
144
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
FINANCIAL STATEMENTS 22. Lease liabilities
When measuring lease liabilities, the Group discounts lease payments using incremental borrowing rates, determined on a lease portfolio basis.
Undiscounted contractual maturity of lease liabilities:
Amounts payable:
On demand or within one year
In the second to fifth years inclusive
After five years
Less: future finance charges
Lease liabilities
Amounts recognised in the Consolidated Income Statement:
Interest on lease liabilities
Income from sub-leasing right-of-use assets
Expenses relating to short-term leases
Expenses relating to low value leases
Amounts recognised in the Consolidated Cash Flow Statement
Cash outflow for leases
23. Trade and other payables
Trade and other payables at 31 December comprise the following:
Current liabilities
Trade payables
Social security and PAYE
Value added tax
Foreign exchange contracts
Accrued expenses
Total trade and other payables
The Directors consider that the carrying amount of trade payables approximates to their fair value.
The average credit period taken for trade purchases is 56 days (2020 – 55 days).
Year ended
2021
£m
Year ended
2020
£m
10.8
35.6
60.9
107.3
(34.1)
73.2
10.3
30.9
67.3
108.5
(32.0)
76.5
Year ended
2021
£m
Year ended
2020
£m
2.6
(0.1)
0.1
–
2.6
3.0
(0.1)
0.1
–
3.0
Year ended
2021
£m
Year ended
2020
£m
11.0
10.9
Year ended
2021
£m
Year ended
2020
£m
68.3
5.7
1.6
3.6
63.8
143.0
57.8
7.9
2.4
2.4
55.6
126.1
24. Provisions
At 1 January 2020
Additional provision in the year
Utilisation of provision
Release of unused amounts
Exchange differences
At 1 January 2021
Additional provision in the year
Utilisation of provision
Release of unused amounts
Exchange differences
At 31 December 2021
Included in current liabilities
Warranty
£m
Restructuring
£m
Legal claims
and contractual
matters
£m
6.0
1.9
(1.1)
(0.1)
(0.1)
6.6
1.3
(1.0)
(0.1)
0.1
6.9
4.9
2.9
21.2
(15.2)
–
–
8.9
2.8
(9.8)
(0.3)
(0.3)
1.3
1.3
12.6
3.1
(5.5)
–
0.1
10.3
2.1
(3.2)
(1.3)
(0.1)
7.8
7.6
Total
£m
21.5
26.2
(21.8)
(0.1)
–
25.8
6.2
(14.0)
(1.7)
(0.3)
16.0
13.8
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
145
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
24. Provisions continued
Warranty
Provisions for warranty costs are based on an assessment of future claims with reference to past experience. £4.9m of costs are expected to settle
within the next 12 months.
Restructuring
The Group continued to implement further restructuring in 2021, discussed in further detail in Note 9. The amount recorded is expected to be fully
utilised in 2022.
Legal claims and contractual matters
During the year ended 31 December 2021, £2.3m settlement payments were paid relating to costs associated with class action lawsuits claiming
Ametek had polluted the groundwater during its tenure as owners of the site where Senior Aerospace Ketema is currently located, comprising £2.4m
provision at 1 January 2021 and £0.1m of exchange differences. Other provisions at 31 December 2021 comprise £7.8m (2020 – £7.9m) relating to
contractual matters that have arisen in the ordinary course of business, the settlement of which are subject to ongoing discussions. Management
exercises judgment to determine the best estimate of the most likely outcome, having considered each provision separately and the possible range
of outcomes. Amounts are recorded for known issues based on past experience of similar items and other known factors and circumstances. As with
any judgment there is a high degree of inherent uncertainty, particularly with legal proceedings and claims, and the actual amounts of the settlement
could differ from the amount provided.
25. Share capital
Issued and fully paid:
419.4 million ordinary shares of 10p each
No shares were issued during 2021 and 2020.
The Company has one class of ordinary shares which carry no right to fixed income.
26. Share premium account
Balance at 1 January
Movement in year
Balance at 31 December
27. Equity reserve
Balance at 1 January
Transfer to retained earnings reserve
Movement in year
Balance at 31 December
Year ended
2021
£m
Year ended
2020
£m
41.9
41.9
Year ended
2021
£m
Year ended
2020
£m
14.8
–
14.8
14.8
–
14.8
Year ended
2021
£m
Year ended
2020
£m
5.1
(2.8)
3.5
5.8
5.5
(3.4)
3.0
5.1
The transfer to retained earnings reserve is in respect of equity-settled share-based payments that vested during the year.
The movement in the year of £3.5m (2020 – £3.0m) is in respect of the share-based payment charge for the year.
28. Hedging and translation reserves
Balance at 1 January
Exchange differences on translation of overseas operations
Foreign exchange losses/(gains) recycled to the Income
Statement on disposal
Change in fair value of hedging derivatives
Tax on foreign exchange contracts- cash flow hedges
Balance at 31 December
Hedging
reserve
Year ended
2021
£m
Translation
reserve
Year ended
2021
£m
Total
Year ended
2021
£m
Hedging
reserve
Year ended
2020
£m
Translation
reserve
Year ended
2020
£m
Total
Year ended
2020
£m
(37.2)
–
2.6
(3.4)
0.8
(37.2)
75.1
(3.8)
(5.5)
–
–
65.8
37.9
(3.8)
(2.9)
(3.4)
0.8
28.6
(40.2)
–
0.9
2.6
(0.5)
(37.2)
79.1
(3.6)
(0.4)
–
–
75.1
38.9
(3.6)
0.5
2.6
(0.5)
37.9
Hedging Reserve
At 31 December 2021, the hedging reserve comprises net investment hedging losses of £35.2m (2020 – £37.8m), foreign exchange contracts – cash
flow hedge losses of £2.6m (2020 – £0.8m gains) and related tax gains of £0.6m (2020 – £0.2m losses).
146
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
FINANCIAL STATEMENTS
28. Hedging and translation reserves continued
Movement in fair value of foreign exchange contracts – cash flow hedges:
Balance at 1 January
Fair value movement recognised
in Hedging reserve
Fair value movement recognised
in Income Statement
Fair value movement recognised
in Hedging reserve and Income Statement
Balance at 31 December
Derivatives at fair
value through
Hedging Reserve
Year ended
2021
£m
Derivatives at fair
value through
Income Statement
Year ended
2021
£m
Total
Year ended
2021
£m
Derivatives at fair
value through
Hedging Reserve
Year ended
2020
£m
Derivatives at fair
value through
Income Statement
Year ended
2020
£m
Total
Year ended
2020
£m
0.8
(2.1)
–
(1.3)
(2.6)
(0.3)
–
(1.2)
1.3
(0.2)
0.5
(2.1)
(1.2)
–
(2.8)
(1.8)
2.0
–
0.6
0.8
(0.3)
(2.1)
–
0.6
(0.6)
(0.3)
2.0
0.6
–
0.5
The Group uses foreign currency forward contracts to manage its foreign currency risk associated with its highly probable forecast transactions.
These contracts are designated as cash flow hedge relationships. To the extent these hedges are effective, the change in fair value of the hedging
instrument is recognised in the hedging reserve. The sum of the fair value of foreign exchange contracts deferred in the hedging reserve and
recognised in the Income Statement is presented as foreign exchange contracts – cash flow hedges. See Note 20 for further details.
Costs of Hedging
The group designates the forward component of foreign currency forward contracts as hedging instruments in cash flow hedge relationships.
29. Retained earnings
Balance at 1 January
Dividends paid
Profit/(loss) for the year
Pension actuarial gain/(loss)
Transfer from equity reserve
Transfer from own share reserve
Tax on deductible temporary differences
Balance at 31 December
30. Own shares
Balance at 1 January
Transfer to retained earnings reserve
Purchase of new shares
Balance at 31 December
Year ended
2021
£m
Year ended
2020
£m
305.1
–
24.2
19.7
2.8
(2.3)
(6.3)
343.2
472.5
–
(158.5)
(11.4)
3.4
(2.5)
1.6
305.1
Year ended
2021
£m
Year ended
2020
£m
(11.5)
2.3
–
(9.2)
(14.0)
2.5
–
(11.5)
The own shares reserve represents the cost of shares purchased in the market and held by the Senior plc Employee Benefit Trust to satisfy options
under the Group’s share option schemes (see Note 33).
At 31 December 2021, the number of own shares held by the Senior Plc Employee Benefit Trust is 3,463,455 (2020 – 4,336,043).
31. Disposal activities
On 22nd April 2021, the Group sold its stand alone, build-to-print helicopter structures operating business, Senior Aerospace Connecticut, based in
the USA. The decision to sell was based on its primary focus on build-to-print parts for the rotary sector, with proceeds from the sale strengthening
the Group’s balance sheet and providing greater flexibility for the Group to operate within its capital deployment framework. For the year ended
31 December 2021, Senior Aerospace Connecticut external revenue was £8.1m (at 2021 exchange rate; 2020 – £36.2m at 2020 exchange rate)
and operating profit was £0.8m (2020 – £5.1m).
A gain of £24.2m arose on disposal after taking fair value of net assets disposed (£28.4m including £15.1m of goodwill, £7.5m property, plant and
equipment and £5.8m of working capital), offset by net cash consideration of £49.7m after £1.8m disposal costs, and the previously recorded foreign
exchange gain that has been recycled to the Income Statement of £2.9m.
In 2021, the Group received £0.2m (2020 – £0.4m) deferred consideration relating to the disposal of its Aerospace business Senior Aerospace
Absolute Manufacturing.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
147
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
32. Notes to the consolidated cash flow statement
A) Reconciliation of operating profit/loss to net cash from operating activities
Operating profit/ (loss)
Adjustments for:
Depreciation of property, plant and equipment
Amortisation of intangible assets
Profit on sale of fixed assets
Share-based payment charges
Pension payments in excess of service cost
Corporate undertaking costs
Share of joint venture
(Increase)/decrease in inventories
(Increase)/decrease in receivables
Increase/(decrease) in payables and provisions
Goodwill impairment
Restructuring impairment of property, plant and equipment and software
US class action lawsuits
Working capital and provisions currency movements
Cash generated by operations
Income taxes paid
Interest paid
Net cash from operating activities
Year ended
2021
£m
Year ended
2020
£m
10.5
(177.3)
46.3
1.5
–
3.5
(5.1)
(4.8)
(0.2)
(7.2)
(16.1)
11.6
–
3.8
(2.3)
(1.1)
40.4
(5.3)
(8.1)
27.0
52.1
9.5
(0.1)
3.0
(5.0)
(4.6)
(0.2)
19.6
48.1
(20.1)
134.3
8.0
(3.9)
(0.2)
63.2
(3.5)
(10.8)
48.9
B) Free cash flow
Free cash flow, a non-statutory item, enhances the reporting of the cash-generating ability of the Group prior to corporate activity such as acquisitions,
restructuring, disposal activities, financing and transactions with shareholders. It is used as a performance measure by the Board and Executive
Committee and is derived as follows:
Net cash from operating activities
Corporate undertaking costs
Net Restructuring cash paid
US class action lawsuits
Interest received
Proceeds on disposal of property, plant and equipment
Purchases of property, plant and equipment
Purchase of intangible assets
Free cash flow
C) Analysis of net debt
Cash and bank balances
Overdrafts
Cash and cash equivalents
Debt due within one year
Debt due after one year
Lease liabilities
Liabilities arising from financing activities
Total
Notes
9
24
24
Year ended
2021
£m
Year ended
2020
£m
27.0
4.8
0.9
2.3
0.1
0.2
(20.2)
(1.1)
14.0
48.9
4.6
15.2
3.9
0.2
0.5
(25.2)
(1.6)
46.5
Notes
22
At
1 January
2021
£m
23.6
(0.4)
23.2
–
(152.6)
(76.5)
(229.1)
(205.9)
Net
Cash
flow
£m
27.8
0.4
28.2
–
21.1
8.4
29.5
57.7
Non
Cash
£m
–
–
–
(14.5)
14.5
–
–
–
Exchange
movement
£m
Other
Lease
Movements
£m
At
31 December
2021
£m
(0.3)
–
(0.3)
(0.3)
0.8
0.5
1.0
0.7
–
–
–
–
–
(5.6)
(5.6)
(5.6)
51.1
–
51.1
(14.8)
(116.2)
(73.2)
(204.2)
(153.1)
Other lease movements include lease additions and modifications of £5.6m.
148
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
FINANCIAL STATEMENTS 32. Notes to the consolidated cash flow statement continued
Cash and bank balances
Overdrafts
Cash and cash equivalents
Debt due within one year
Debt due after one year
Lease liabilities
Liabilities arising from financing activities
Total
Notes
22
At
1 January
2020
£m
15.8
(0.7)
15.1
(15.0)
(146.0)
(83.7)
(244.7)
(229.6)
Net
Cash
flow
£m
7.9
0.2
8.1
15.7
(8.5)
7.9
15.1
23.2
Non
Cash
£m
Exchange
movement
£m
Other
Lease
Movements
£m
At
31 December
2020
£m
–
–
–
–
--
–
–
–
(0.1)
0.1
–
(0.7)
1.9
1.2
2.4
2.4
–
–
–
–
–
(1.9)
(1.9)
(1.9)
23.6
(0.4)
23.2
–
(152.6)
(76.5)
(229.1)
(205.9)
Other lease movements include lease additions and modifications of £1.9m.
Cash and cash equivalents comprise:
Cash and bank balances
Overdrafts
Total
Year ended
2021
£m
Year ended
2020
£m
51.1
–
51.1
23.6
(0.4)
23.2
Cash and cash equivalents (which are presented as a single class of assets on the face of the Consolidated Balance Sheet) comprise cash at bank and
other short-term highly liquid investments with a maturity of three months or less. The Directors consider that the carrying amount of cash and cash
equivalents approximates to their fair value.
D) Analysis of working capital and provisions
Working capital comprises the following:
Inventories
Trade and other receivables
Trade and other payables
Working capital, including derivatives
Items excluded:
Foreign exchange contracts
Deferred consideration relating to disposals – current
Total
Working capital and provisions movement, net of restructuring items, a non-statutory cash flow item, is derived as follows:
(Increase)/decrease in inventories
(Increase)/decrease in receivables
Increase/(decrease) in payables and provisions
Working capital and provisions movement, excluding currency effects
Items excluded:
Decrease/(increase) in restructuring related inventory impairment
Decrease/(increase) in net restructuring provision and other receivables
Total
Year ended
2021
£m
Year ended
2020
£m
145.2
98.0
(143.0)
100.2
2.8
–
103.0
147.6
85.3
(126.1)
106.8
(0.5)
(0.3)
106.0
Year ended
2021
£m
Year ended
2020
£m
(7.2)
(16.1)
11.6
(11.7)
1.5
7.6
(2.6)
19.6
48.1
(20.1)
47.6
(9.3)
(6.0)
32.3
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
149
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
33. Share-based payments
The Group recognised total expenses of £3.8m (2020 – £3.0m) related to share-based payments, of which £3.5m (2020 – £3.0m) related to equity-
settled share-based payments, and £0.3m (2020 – £nil) related to social security costs on share-based payments. As at 31 December 2021, the Group
had a liability of £0.3m (2020 – £0.1m) arising from share-based payments relating to social security costs.
A) 2005 Long-Term Incentive Plan
Equity-settled Long-Term Incentive Plans
On 12 March 2021, 4,396,538 shares were awarded under the 2005 Long-Term Incentive Plan. Awards made under this plan prior to 2021 have a
three-year vesting period, subject to earnings per share (EPS) and total shareholder return (TSR) performance conditions being met. Half the awards
have an attaching performance target for EPS growth over the three-year performance period of at least 4% per annum above RPI. The other half of
the awards begin to vest if the Group’s TSR falls in the top half of a comparator group at the end of the three-year performance period. For awards
made in 2021 Adjusted EPS and TSR metrics have been retained and ROCE added as a third performance measure, with each metric having an equal
weighting of one third. The EPS target is now expressed as an absolute number rather than a growth percentage. Vesting levels increase with higher
performance. The awards are settled by delivering shares to the participants.
The estimated fair value for the awards granted in the year, excluding for the Executive Directors, with EPS conditions is 112.80p, which is the share
price at the date of grant. The estimated fair value for the awards granted in the year, excluding for the Executive Directors, with TSR conditions
is 94.80p per share reflecting an adjustment of 16% to the fair value of the awards with EPS conditions due to the stringent TSR condition.
The respective fair values for awards made to the Executive Directors is 92.50p and 77.70p reflecting the two year retention period.
These fair values were calculated by applying a binomial option pricing model. This model incorporates a technique called “bootstrapping”, which
models the impact of the TSR condition. The model inputs at the date of grant were the share price (112.80p for the main award), expected volatility
of 54% per annum, and the performance conditions as noted above. Expected volatility was determined by calculating the historical volatility of the
Group’s share price over the previous three years.
The following share awards were outstanding as at 31 December 2021 and 2020:
Outstanding at 1 January
Granted
Exercised
Forfeited
Outstanding at 31 December
Year ended
2021
Number of
shares
7,089,567
4,455,281
(58,743)
(2,051,864)
9,434,241
Year ended
2020
Number of
shares
6,370,205
3,576,238
(663,104)
(2,193,772)
7,089,567
B) Enhanced SMIS Deferred Share Award
On 12 March 2021, 694,536 shares were awarded under the Enhanced SMIS Deferred Share Award. Shares earned under this award have a three-
year deferral period and would be subject to forfeiture by a “bad leaver” over that deferral period. There are no performance criteria for this award.
The awards are settled by delivering shares to the participants.
The estimated fair value for the awards granted in the year is 112.80p per share, which is the share price at the date of grant.
The following share awards were outstanding as at 31 December 2021 and 2020:
Outstanding at 1 January
Granted
Exercised
Forfeited
Outstanding at 31 December
Year ended
2021
Number of
shares
1,734,683
758,551
(425,422)
(64,121)
2,003,691
Year ended
2020
Number of
shares
1,187,669
794,715
(247,701)
–
1,734,683
150
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
FINANCIAL STATEMENTS 33. Share-based payments continued
C) Savings-Related Share Option Plan
The Company operates a Savings-Related Share Option Plan for eligible employees across the Group. There are no performance criteria for this
arrangement and options are issued to all participants in accordance with the HM Revenue & Customs rules for such savings plans. Savings-Related
Share Options were last issued on 26 May 2021.
The following options were outstanding as at 31 December 2021 and 2020:
Outstanding at 1 January
Granted
Exercised
Forfeited
Expired
Outstanding at 31 December
Exercisable at 31 December
Year ended 2021
Year ended 2020
Number of
share
options
1,944,121
3,247,159
–
(676,596)
(261,180)
4,253,504
–
Weighted
average
exercise
price
Number of
share
options
217.67p
118.40p
–
4,390,225
–
–
204.63p (1,880,038)
(566,066)
207.20p
1,944,121
144.61p
261,180
–
Weighted
average
exercise
price
215.95p
–
–
212.34p
222.00p
217.67p
207.20p
No shares were exercised in 2021 and 2020. The options outstanding at 31 December 2021 had exercise prices of 118.40p and 219.30p per share,
and a weighted average remaining contractual life of 2.4 years. The options outstanding at 31 December 2020 had exercise prices of 219.30p and
207.20p per share, and a weighted average remaining contractual life of 1.7 years.
D) Restricted Share Awards
On 12 March 2021, 110,000 shares were awarded under this plan. Shares granted under this award have a three-year deferral period and would be
subject to forfeiture by a “bad leaver” over that deferral period. There are no performance criteria for this award. The awards are settled by delivering
shares to the participants.
The estimated fair value for the awards granted in the year is 112.80p per share, which is the share price at the date of grant.
The following share awards were outstanding as at 31 December 2021 and 2020:
Outstanding at 1 January
Granted
Exercised
Forfeited
Outstanding at 31 December
Year ended
2021
Number of
shares
2,208,538
110,000
(388,423)
–
1,930,115
Year ended
2020
Number of
shares
170,000
2,073,538
(25,000)
(10,000)
2,208,538
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
151
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
34. Retirement benefit schemes
The Group operates a number of pension plans in the UK, North America and Europe. These include both defined contribution arrangements and
defined benefit arrangements. The Senior plc Pension Plan (“the UK Plan”), which is a funded scheme in the UK and closed to future accrual at the
end of 6 April 2014, has the largest pension obligation in the Group and Company. This plan provides benefits based on final pensionable emoluments
for the employees of the Group and Company. The latest full actuarial valuation was carried out as at 5 April 2019 and, for the purposes of accounting
under IAS19, this valuation has been rolled forward to 31 December 2021.
In addition, the Group operates two defined benefit plans in the US, one of which was closed to future accrual from October 2009. The second plan
was closed to future participants from September 2013, and the Executive section was also closed to future accruals from December 2013. Separate
disclosure is made for the funded UK and US defined benefit arrangements. In both the UK and US, the assets of funded plans are held in separate
trustee administered funds managed by independent financial institutions and have pension costs assessed by consulting actuaries using the
Projected Unit Method. The Trustees are required to act in the best interests of the plans’ beneficiaries.
The Group also has a small number of unfunded post-retirement plans, including a closed healthcare scheme in the US. Separate disclosure is provided
for these arrangements.
Further details on the arrangement of the UK Plan are given below.
The Trustee of the UK Plan is Senior Trustee Limited. The appointment of the Directors to the Board is determined by the Articles of Association of
Senior Trustee Limited. There are seven Trustee Directors in total and in accordance with statutory requirements under the Pensions Act 2004 at least
three must be a Member Nominated Director. Currently, there are three Member Nominated Directors and four Directors who have been nominated
by the Company, of which the Chairman and one other Director are viewed as independent.
The UK Plan exposes the Company to a number of risks. In particular:
• Uncertainty in benefit payments – the value of the obligations will ultimately depend on the amount of benefits paid out. This in turn will depend on
factors such as the level of inflation and how long individuals live.
• Volatility in asset values – the value of the assets held to meet future benefit payments is volatile, for example due to changes in stock markets and
interest rates.
• Uncertainty in cash funding – movements in the value of the UK Plan’s obligations or assets may result in the Company being required to provide
higher levels of cash funding.
The investment strategy for the UK Plan is decided by the Trustee in consultation with Senior plc. The primary investment objective is for the Plan to
be able to meet benefit payments as they fall due. The UK Plan’s average duration is around 15 years and benefits are expected to be paid for the next
60 to 70 years. These cash flow payments are expected to reach a peak around 2029, and gradually decline thereafter as the membership matures.
In setting this strategy, the Trustee considers a wide range of asset classes, the risk and rewards of a number of possible asset allocation options,
the sustainability of each asset class within each strategy, and the need for appropriate diversification between different asset classes. The primary
investment objective is implemented by setting strategic asset allocations using a “linear de-risking” approach. Under this approach, the Plan’s current
asset strategy of 77% invested in low-risk matching assets, such as ‘liability driven investments’ (LDI) and bonds, and 23% in higher-risk return
seeking assets, such as equities, is expected to be linearly moved into 100% matching assets over the period from April 2021 to April 2036. The LDI
allocation helps to mitigate investment risk for the UK Plan by minimising the fluctuations in the UK Plan’s funding levels arising from changes in the
value of the liabilities. This is achieved through hedging movements in the funding liabilities caused by changes in interest rates and inflation
expectations. The Trustee continues to review its investment strategy and has also implemented a switching mechanism to secure any
outperformances of equities relative to bonds, by selling equities to buy bonds.
While the UK Plan was in a deficit position of £10.2m as at 5 April 2019 when measured on the Trustee’s funding basis, the UK Plan is in a surplus
position of £72.2m as at 31 December 2021 (2020 – £46.5m surplus) when measured on an IAS 19 basis. The difference between the triennial
funding and annual IAS 19 valuation relates to the assumptions used. For example, the funding discount rate is based on the UK Plan’s stated
investment strategy, as opposed to the yields available on corporate bonds for the IAS 19 discount rate.
The IAS 19 surplus position on the UK Plan is recognised as an asset in the Consolidated and Company Balance Sheet, with no requirement to
recognise an additional liability on the UK Plan, on the grounds that the Company has an unconditional right to a refund, assuming the gradual
settlement of Plan liabilities over time until all members have left. In considering this, the Company has taken into account that the Trustees do not
have unilateral powers to wind up the Plan or modify benefits.
Cash contributions to the UK Plan are set by agreement between the Company and the Trustee of the UK Plan. These are set in accordance with
legislation and take account of the intention to further reduce the risk associated with the UK Plan’s investment strategy, as set out above. The
contributions were last reviewed as at 5 April 2019 and were based on a forecast deficit at that time, as part of the 2019 triennial funding valuation.
The Company has agreed with the Trustee of the UK Plan to make scheduled deficit reduction contributions over the three year period from April 2019
to March 2022. Annual cash funding contributions of £5.5m are expected over this period, subject to review and amendment as appropriate, at the
next funding valuation in 2022. The estimated contributions expected to be paid during 2022 in the US funded plans is £2.2m.
The Group is ultimately responsible for making up any shortfall in the UK Plan over a period agreed with the Trustees. To the extent that actual
experience is different from that assumed, the funding position will be better or worse than anticipated. As such, the contributions required by the
Group could vary in the future.
152
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
FINANCIAL STATEMENTS 34. Retirement benefit schemes continued
a) Defined contribution schemes
The Group has a number of different defined contribution and government-sponsored arrangements in place in the countries in which it operates.
None of these are individually material to the Group and the aggregate cost of such schemes for the period was £8.6m (2020 – £9.2m).
b) Defined benefit schemes
The amount included in the Consolidated Balance Sheet arising from the Group’s obligations in respect of its defined benefit plans is set out below.
31 December 2021
31 December 2020
UK plans
funded
£m
US plans
funded
£m
Unfunded
plans
£m
Total
£m
UK plans
funded
£m
US plans
funded
£m
Unfunded
plans
£m
Total
£m
Present value of defined
benefit obligations
Fair value of plan assets
Plan surplus/(deficit) per Consolidated Balance Sheet
(294.9)
367.1
72.2
(56.2)
50.9
(5.3)
(5.7)
–
(5.7)
(356.8)
418.0
61.2
(317.7)
364.2
46.5
(58.8)
54.1
(4.7)
(6.2)
–
(6.2)
(382.7)
418.3
35.6
c) Movements in the present value of defined benefit obligations were as follows:
At 1 January
Current service cost
Past service cost
Interest cost
Experience on benefit obligations
Actuarial (gains)/losses – financial
Actuarial (gains)/losses- demographic
Benefits paid
Disposal activities
Exchange differences
At 31 December
31 December 2021
31 December 2020
UK plans
funded
£m
US plans
funded
£m
Unfunded
plans
£m
317.7
–
–
3.8
2.5
(15.8)
(0.3)
(13.0)
–
–
294.9
58.8
0.4
–
1.5
–
(1.8)
0.2
(3.7)
–
0.8
56.2
6.2
0.3
–
–
–
–
–
(0.4)
–
(0.4)
5.7
Total
£m
382.7
0.7
–
5.3
2.5
(17.6)
(0.1)
(17.1)
–
0.4
356.8
UK plans
funded
£m
US plans
funded
£m
Unfunded
plans
£m
285.8
–
0.2
5.7
(1.2)
35.4
3.8
(12.0)
–
–
317.7
54.6
0.4
–
1.8
1.1
6.0
(0.4)
(2.7)
–
(2.0)
58.8
6.9
0.5
–
0.1
–
–
–
(1.6)
–
0.3
6.2
d) Movements in the fair value of plan assets were as follows:
At 1 January
Interest on plan assets
Actual return on plan assets less interest
Contributions from employer
Benefits paid
Running costs
Exchange differences
At 31 December
31 December 2021
31 December 2020
UK plans
funded
£m
US plans
funded
£m
Unfunded
plans
£m
364.2
4.4
6.1
6.0
(13.0)
(0.6)
–
367.1
54.1
1.3
(1.6)
–
(3.7)
–
0.8
50.9
–
–
–
–
–
–
–
–
Total
£m
418.3
5.7
4.5
6.0
(16.7)
(0.6)
0.8
418.0
UK plans
funded
£m
US plans
funded
£m
Unfunded
plans
£m
334.7
6.8
29.6
5.6
(12.0)
(0.5)
–
364.2
52.6
1.7
3.7
0.6
(2.7)
(0.1)
(1.7)
54.1
1.1
–
–
–
(1.1)
–
–
–
e) Amounts recognised in the Consolidated Income Statement in respect of these defined benefit schemes are as follows:
31 December 2021
31 December 2020
UK plans
funded
£m
US plans
funded
£m
Unfunded
plans
£m
Current service cost included within operating loss/profit
Running costs
Past service cost
Charge included within operating profit/loss
Included within finance (income)/costs
Amount recognised in the Income Statement
–
0.6
–
0.6
(0.6)
–
0.4
–
–
0.4
0.2
0.6
0.3
–
–
0.3
–
0.3
Total
£m
0.7
0.6
–
1.3
(0.4)
0.9
UK plans
funded
£m
US plans
funded
£m
Unfunded
plans
£m
–
0.5
0.2
0.7
(1.1)
(0.4)
0.4
0.1
–
0.5
0.1
0.6
0.5
–
–
0.5
0.1
0.6
Total
£m
347.3
0.9
0.2
7.6
(0.1)
41.4
3.4
(16.3)
–
(1.7)
382.7
Total
£m
388.4
8.5
33.3
6.2
(15.8)
(0.6)
(1.7)
418.3
Total
£m
0.9
0.6
0.2
1.7
(0.9)
0.8
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
153
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
34. Retirement benefit schemes continued
f) Amounts recognised in other comprehensive income are as follows:
31 December 2021
31 December 2020
Net actuarial gain/(losses) in the year due to:
– Change in financial assumptions
– Change in demographic assumptions
– Experience adjustments on benefit obligations
Actual return on plan assets less interest
on benefit obligations
Gains/(losses) recognised in other
comprehensive income
UK plans
funded
£m
US plans
funded
£m
Unfunded
plans
£m
15.8
0.3
(2.5)
1.8
(0.2)
–
6.1
(1.6)
19.7
–
–
–
–
–
–
UK plans
funded
£m
US plans
funded
£m
Unfunded
plans
£m
Total
£m
17.6
0.1
(2.5)
(35.4)
(3.8)
1.2
(6.0)
0.4
(1.1)
4.5
29.6
3.7
19.7
(8.4)
(3.0)
Total
£m
(41.4)
(3.4)
0.1
33.3
(11.4)
–
–
–
–
–
Actuarial gains of £19.7m (2020 – losses of £11.4m) have been recognised in the Statement of Comprehensive Income. The cumulative amount of
actuarial losses recognised in the Statement of Comprehensive Income as at 31 December 2021 is £23.0m (2020 – £42.7m).
g) Assets and assumptions in funded plans
Fair value of plan assets
Equities
Bonds
Gilts
Diversified growth fund
Cash and net current assets
Total
Actual return on plan assets
UK plans funded
US plans funded
2021
£m
2020
£m
28.6
126.6
157.9
37.7
16.3
367.1
32.9
127.5
156.7
41.2
5.9
364.2
2021
£m
–
50.9
–
–
–
50.9
2020
£m
–
54.1
–
–
–
54.1
10.5
36.4
(0.3)
5.4
The UK Plan’s assets are invested in pooled funds, which are invested exclusively within instruments with quoted market prices in an active market,
with the exception of the Plan’s holdings in insurance annuity policies, valued at £4.7m (2020 – £5.5m). The value of the invested assets has been
measured at bid value and the value of the scheme benefits covered by the insurance annuity policies has been set equal to the value of the
corresponding obligations.
The Plan’s equities are split between UK and overseas companies, with a larger allocation to the overseas market. The UK equities are passively
invested in line with the FTSE All-Share Index and the overseas equities are passively invested in line with the FTSE World ex-UK GBP Hedged Index.
Therefore, the Plan is exposed to a typical breakdown of industries within those equity indices. The Plan’s corporate bond allocation is split between an
actively managed mandate and a “buy and maintain” mandate, which seeks to hold a high quality portfolio while minimising portfolio turnover. Both
mandates are predominantly invested in investment grade UK corporate bonds and are exposed to a fairly typical range of UK businesses. The majority
of the Plan’s gilts are passively invested in a range of UK fixed-interest and index-linked government bonds, with the remainder actively invested in a
range of swap instruments linked to movements in government bond prices. The risks associated with the Plan’s bond and gilt investments are largely
offset by corresponding risks present within the pricing of the Plan’s benefit obligations. The diversified growth fund is an investment in Pyrford’s
absolute return fund. This fund is composed of positions in a range of assets, including bonds and equities. These positions vary over time according
to Pyrford’s views. The fund looks to generate equity-like returns, with reduced volatility, whilst also providing diversification benefits to the Plan’s
other investments.
The UK Plan does not invest directly in property occupied by the Company or in financial securities issued by the Company.
Major assumptions (per annum %)
Inflation
Increase in salaries
Increase in pensions
Increase in deferred pensions
Rate used to discount plan liabilities
UK plans funded
US plans funded
2021
2020
2021
2020
3.50%
N/A
3.30%
3.50%
1.90%
3.00%
N/A
2.90%
3.00%
1.20%
N/A
N/A
0.00%
0.00%
2.76%
N/A
N/A
0.00%
0.00%
2.51%
Life expectancy of a male aged 65 at the year-end
Life expectancy of a male aged 65, 20 years after the year-end
20.8
22.2
20.8
22.2
19.6
21.2
19.5
21.1
154
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
FINANCIAL STATEMENTS 34. Retirement benefit schemes continued
g) Assets and assumptions in funded plans continued
Benefits under the US funded plans are not linked to inflation.
The UK Plan retirement benefit obligation is discounted at a rate set by reference to market yields at the end of the reporting period on high quality
corporate bonds. Estimation is required when setting the criteria for bonds to be included in the population from which the yield curve is derived. The
most significant criteria considered for the selection of bonds include the issue size of the corporate bonds, quality of the bonds and the identification
of outliers which are excluded. The assumption for estimating future Retail Prices Index (RPI) inflation is based on the difference in yields on fixed-
interest and index-linked gilts. Demographic assumptions are set broadly in line with the most recent actuarial valuation of the UK plan. The mortality
assumption is 95% of standard mortality tables with an allowance for future improvements in line with the CMI 2020 enhanced projections, with a
long-term annual rate of improvement of 1.25% for males and for females, and currently with no explicit adjustment for the potential long-term impact
of Covid-19. The methodology used for determining the discount rate, in measuring the UK retirement benefit scheme, has been updated in 2021
following actuarial advice to ensure that the discount rate remains robust to changes in the bond yields, which has increased the discount rate by 0.1%.
For the UK Plan, the estimated impact on the plan surplus at 31 December 2021 for changes in assumptions is as follows:
0.5% decrease in the discount rate
One-year increase in life expectancy
0.5% increase in inflation
Decrease in
plan surplus
£m
20.7
(14.0)
(13.2)
These sensitivities have been calculated to show the movement in the surplus, including allowance for an increase to the value of insured annuity
assets, but assuming no other changes in assets as at 31 December 2021. This is unlikely in practice – for example, a change in discount rate is unlikely
to occur without any movement in the value of the assets held by the Plan.
h) Other post-retirement liabilities
This balance comprises an unfunded German pension plan of £3.3m (2020 – £3.7m), unfunded closed pension and post-retirement healthcare plans in
the US of £0.3m (2020 – £0.3m), a provision for post-retirement payments in France of £1.4m (2020 – £1.5m) and £0.7m for post-retirement payments
in Thailand (2020 – £0.7m).
The closed pension and post-retirement healthcare plans in the US have been valued on a Projected Unit Method using a discount rate of 2.8%
(2020 – 2.5%). No participants were eligible for medical benefits under the healthcare plan in 2021. The German plan has been subject to formal
actuarial valuation on a Projected Unit Method with the following assumptions: discount rate 1.1%, salary growth 0.0% and pension increase 1.8%
(2020 – 1.0%, 0.0% and 1.5%). In France, the provision arises from a legal obligation to make payments to retirees in the first two years post-
retirement. Hence, it is not subject to discounting to the same extent as the other longer-term post-retirement liabilities. The Thailand plan has been
subject to a formal actuarial valuation on a Projected Unit Method with the following assumptions: discount rate 2.8%, inflation rate 2.8% and salary
growth 6.0% (2020 – 2.2%, 2.8% and 6.0%).
35. Contingent liabilities
The Group is subject to various claims which arise from time to time in the course of its business including, for example, in relation to commercial
matters, product quality or liability, and tax audits. Where the Board has assessed there to be a more likely than not outflow of economic benefits,
provision has been made for the best estimate as at 31 December 2021 (see Note 24). For all other matters, the Board has concluded that it is not
more likely than not that there will be an economic outflow of benefits. While the outcome of some of these matters cannot be predicted with any
certainty, the Directors do not expect any of these arrangements, legal actions or claims, after allowing for provisions already made where appropriate,
to result in significant loss to the Group.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
155
COMPANY BALANCE SHEET
As at 31 December 2021
Non-current assets
Investment in subsidiaries
Property, plant and equipment
Other intangible assets
Other receivables
Retirement benefits
Total non-current assets
Current assets
Other receivables
Cash and bank balances
Current tax receivables
Total current assets
Total assets
Current liabilities
Trade and other payables
Bank overdrafts and loans
Total current liabilities
Non-current liabilities
Bank and other loans
Lease liabilities
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued share capital
Share premium account
Equity reserve
Hedging and translation reserve
Retained earnings
Own shares
Total equity
Year ended
2021
£m
Year ended
2020
£m
Notes
38
39
37
40
50
40
47
49
42
41
41
48
49
43
44
45
46
259.9
1.3
0.1
25.7
72.2
359.2
65.4
4.7
–
70.1
429.3
70.1
14.8
84.9
94.1
1.2
14.2
109.5
194.4
234.9
41.9
14.8
5.8
–
181.6
(9.2)
234.9
259.9
1.5
0.1
27.2
46.5
335.2
78.6
0.7
–
79.3
414.5
91.8
–
91.8
128.3
1.4
6.9
136.6
228.4
186.1
41.9
14.8
5.1
–
135.8
(11.5)
186.1
The Profit for the Company for the year ended 31 December 2021 was £31.9m (2020 – £13.7m Loss).
The Financial Statements of Senior plc (registered number 282772) were approved by the Board of Directors and authorised for issue on 25 February
2022. They were signed on its behalf by:
David Squires
Director
Bindi Foyle
Director
156
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
FINANCIAL STATEMENTS
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2021
Balance at 1 January 2020
Loss for the year 2020
Actuarial losses on defined benefit pension schemes
Exchange differences recycled to income statement
Tax relating to components of other comprehensive income
Total comprehensive income/(expense) for the period
Share-based payment charge
Tax relating to share-based payments
Purchase of shares held by employee benefit trust
Use of shares held by employee benefit trust
Transfer to retained earnings
Dividends paid
Balance at 31 December 2020
Profit for the year 2021
Actuarial gains on defined benefit pension schemes
Exchange differences recycled to income statement
Tax relating to components of other comprehensive income
Total comprehensive income for the period
Share-based payment charge
Tax relating to share-based payments
Purchase of shares held by employee benefit trust
Use of shares held by employee benefit trust
Transfer to retained earnings
Dividends paid
Balance at 31 December 2021
All equity is attributable to equity holders of the Company
Issued
share
capital
£m
Share
premium
account
£m
Notes
Hedging
and
translation
reserve
£m
Equity
reserve
£m
Retained
earnings
£m
41.9
–
–
–
–
–
–
–
–
–
–
–
41.9
–
–
–
–
–
–
–
–
–
–
–
41.9
14.8
–
–
–
–
–
–
–
–
–
–
–
14.8
–
–
–
–
–
–
–
–
–
–
–
14.8
5.5
–
–
–
–
–
3.0
–
–
–
(3.4)
–
5.1
–
–
–
–
–
3.5
–
–
–
(2.8)
–
5.8
(0.3)
–
–
0.3
–
0.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
156.5
(13.7)
(8.4)
–
0.5
(21.6)
–
–
–
(2.5)
3.4
–
135.8
31.9
19.7
–
(6.4)
45.2
–
0.1
–
(2.3)
2.8
–
181.6
46
46
45
11
46
46
45
11
Own
shares
£m
(14.0)
–
–
–
–
–
–
–
–
2.5
–
–
(11.5)
–
–
–
–
–
–
–
–
2.3
–
–
(9.2)
Total
equity
£m
204.4
(13.7)
(8.4)
0.3
0.5
(21.3)
3.0
–
–
–
–
–
186.1
31.9
19.7
–
(6.4)
45.2
3.5
0.1
–
–
–
–
234.9
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
157
NOTES TO THE COMPANY FINANCIAL STATEMENTS
36. Accounting policies
Basis of accounting (Company only)
These Financial Statements were prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (“FRS 101”). In
preparing these Financial Statements, the Company applies the recognition, measurement and disclosure requirements of UK-adopted international
accounting standards (“Adopted IFRSs”), but makes amendments where necessary in order to comply with Companies Act 2006 and has taken
advantage of the FRS 101 disclosure exemptions for share-based payments, financial instruments, fair value measurements, capital management,
presentation of a cash flow statement and disclosure of related party transactions.
The Financial Statements have been prepared on the historical cost basis. They have also been prepared on the going concern basis, as set out in
the basis of preparation, Note 2 to the Consolidated Financial Statements. The principal accounting policies adopted are the same as those set out in
Note 2 to the Consolidated Financial Statements, except in respect of investments in subsidiaries, which are stated at cost less, where appropriate,
provisions for impairment. The carrying values of investments in subsidiaries are reviewed for impairment if events or changes in circumstances
indicate the carrying values may not be recoverable.
The Company is incorporated in England and Wales under the Companies Act.
37. Other intangible assets
Cost
At 1 January
Additions
At 31 December
Amortisation
At 1 January
Charge for the year
At 31 December
Carrying amount at 31 December
Year ended
2021
Computer
software
£m
Year ended
2020
Computer
software
£m
1.0
–
1.0
0.9
–
0.9
0.1
0.9
0.1
1.0
0.7
0.2
0.9
0.1
38. Investments in subsidiaries
A list of the significant investments in subsidiaries, including the name, country of incorporation, and proportion of ownership interest is given on pages
164 to 165.
At 1 January and 31 December
39. Property, plant and equipment
Cost
At 1 January
Additions
Disposals
At 31 December
Accumulated depreciation
At 1 January
Charge for the year
Eliminated on Disposals
At 31 December
Carrying amount at 31 December
The carrying amount includes £1.1m of right-of-use assets (2020 – £1.3m)
158
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
Year ended
2021
£m
Year ended
2020
£m
259.9
259.9
Year ended
2021
Plant and
equipment
£m
Year ended
2020
Plant and
equipment
£m
2.4
–
–
2.4
0.9
0.2
–
1.1
1.3
2.4
–
–
2.4
0.7
0.2
–
0.9
1.5
FINANCIAL STATEMENTS 40. Other receivables
Other receivables comprise the following:
Other receivables: amounts due more than one year
Due from subsidiaries
Other receivables: amounts due within one year
Value added tax
Prepayments and accrued income
Due from subsidiaries
Total other receivables
Year ended
2021
£m
Year ended
2020
£m
25.7
25.7
0.2
1.0
64.2
65.4
91.1
27.2
27.2
0.1
0.6
77.9
78.6
105.8
The Directors consider that the carrying amount of debtors approximates to their fair value. The maximum exposure to credit risk at the reporting date
is the fair value of each class of receivable above. The Company does not hold any collateral as security.
The carrying amounts due from subsidiaries approximates to their fair value. There are no past due receivable balances and expected credit losses are
immaterial (2020 – immaterial).
As at 31 December 2021, other receivables due in more than one year consist of £2.2m (2020 – £2.2m) due in accordance with the vesting periods
of share-based payments and £23.5m (2020 – £25.0m) of loans to subsidiaries at market rates of interest.
41. Bank overdrafts and loans
Bank overdrafts
Bank loans
Other loans
Total
The borrowings are repayable as follows:
On demand or within one year
In the second year
In the third to fifth years inclusive
After five years
Less: amount due for settlement within 12 months (shown under current liabilities)
Amount due for settlement after 12 months
Year ended
2021
£m
Year ended
2020
£m
–
(0.5)
109.4
108.9
14.8
–
70.7
23.4
108.9
(14.8)
94.1
–
18.3
110.0
128.3
–
14.6
88.8
24.9
128.3
–
128.3
At 31 December 2021, bank loans are undrawn and there are £0.5m of capitalised revolving credit facility transaction costs. At 31 December 2020,
bank loans of £19.1m were drawn, offset by £0.8m of capitalised transaction costs.
Analysis of borrowings by currency
31 December 2021
Bank overdrafts
Bank loans
Other loans
31 December 2020
Bank overdrafts
Bank loans
Other loans
Pound
Sterling
£m
–
(0.5)
26.9
26.4
Pound
Sterling
£m
–
3.7
26.9
30.6
Euros
£m
–
–
23.4
23.4
Euros
£m
–
–
24.9
24.9
US
Dollars
£m
–
–
59.1
59.1
US
Dollars
£m
–
14.6
58.2
72.8
Total
£m
–
(0.5)
109.4
108.9
Total
£m
–
18.3
110.0
128.3
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
159
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
41. Bank overdrafts and loans continued
Analysis of borrowings by currency continued
The weighted average interest rates paid were as follows:
Bank loans and overdrafts
Other loans
Year ended
2021
%
Year ended
2020
%
1.26
2.88
1.57
2.86
Bank loans of £nil (2020 – £19.1m) are arranged at floating rates, thus exposing the Company to cash flow interest rate risk. Other borrowings are
mainly arranged at fixed interest rates and expose the Company to fair value interest rate risk. No interest rate swaps were taken out in 2020 or 2021.
Transaction costs of £0.5m (2020 – £0.8m) have been deducted from the bank loans carrying value. Transaction costs of £0.4m, directly attributable
to the GBP notes (£0.1m), the Euro notes (£0.1m) and the US Dollar notes (£0.2m) have been deducted from the carrying value of Other loans.
The Directors estimate the fair value of the Company’s borrowings to be as follows:
Bank loans and overdrafts
Other loans
42. Trade and other payables
Trade and other payables comprise the following:
Trade and other payables: amounts falling due within one year
Trade payables
Social security and PAYE
Other payables and accruals
Due to subsidiaries
Total trade and other payables
The Directors consider that the carrying amount of trade payables approximates to their fair value.
43. Issued share capital
Issued and fully paid:
419.4 million ordinary shares of 10p each
No shares were issued during 2020 and 2021.
The Company has one class of ordinary shares, which carry no right to fixed income.
44. Hedging and translation reserves
Year ended
2021
£m
Year ended
2020
£m
(0.5)
110.4
109.9
18.3
109.4
127.7
Year ended
2021
£m
Year ended
2020
£m
0.9
0.2
6.8
62.2
70.1
0.6
0.2
4.6
86.4
91.8
Year ended
2021
£m
Year ended
2020
£m
41.9
41.9
Balance at 1 January
Exchange differences recycled to Income Statement
Balance at 31 December
Hedging
reserve
Year ended
2021
£m
Translation
reserve
Year ended
2021
£m
Total
Year ended
2021
£m
Hedging
reserve
Year ended
2020
£m
Translation
reserve
Year ended
2020
£m
–
–
–
–
–
–
–
–
–
–
–
–
(0.3)
0.3
–
Total
Year ended
2020
£m
(0.3)
0.3
–
160
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
FINANCIAL STATEMENTS 45. Retained earnings
Balance at 1 January
Dividends paid
Profit/(loss) for the year
Pension actuarial gain/(loss)
Transfer from equity reserve
Transfer from own share reserve
Tax on deductible temporary differences
Balance at 31 December
Year ended
2021
£m
Year ended
2020
£m
135.8
–
31.9
19.7
2.8
(2.3)
(6.3)
181.6
156.5
–
(13.7)
(8.4)
3.4
(2.5)
0.5
135.8
£7.5m (2020 – £7.5m) of the Company’s retained earnings are considered undistributable.
In accordance with Section 408 of the Companies Act 2006, the Company has not presented its own Statement of Comprehensive Income, including
the Income Statement and related Notes.
46. Own shares
Balance at 1 January
Transfer to retained earnings
Purchase of new shares
Balance at 31 December
Year ended
2021
£m
Year ended
2020
£m
(11.5)
2.3
–
(9.2)
(14.0)
2.5
–
(11.5)
The own shares reserve represents the cost of shares purchased in the market and held by the Senior plc Employee Benefit Trust to satisfy options
under the Group’s share option schemes (see Note 33).
The nominal value of each share is £0.1 (2020 – £0.1). The total number of treasury shares at 31 December 2021 is 3,463,455 (2020 – 4,336,043).
47. Cash and bank balances
Cash and cash equivalents comprise:
Cash
Year ended
2021
£m
Year ended
2020
£m
4.7
0.7
Cash and bank balances held by the Company (which are presented as a single class of assets on the face of the Balance Sheet) comprise cash at
bank and other short-term highly liquid investments with a maturity of three months or less. The Directors consider that the carrying amount of cash
and cash equivalents approximate to their face value.
48. Lease liabilities
When measuring lease liabilities, the Company discounts lease payments using incremental borrowing rates, determined on a lease portfolio basis.
Undiscounted contractual maturity of lease liabilities:
Amounts payable:
On demand or within one year
In the second to fifth years inclusive
After five years
Less: future finance charges
Lease liabilities
Year ended
2021
£m
Year ended
2020
£m
0.2
0.9
0.2
1.3
(0.1)
1.2
0.2
0.9
0.4
1.5
(0.1)
1.4
In 2021, the Company recognised income of £0.1m (2020 – £0.1m) in the Company Income Statement from sub-leasing right-of-use assets and had
lease cash outflow of £0.2m (2020 – £0.2m).
As at the date of approving the accounts, the Company has guaranteed £0.5m (2020 – £0.5m) of annual lease commitments of certain current and
previous subsidiary entities.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
161
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
49. Tax balance sheet
Current tax
The current tax receivable is £nil (2020 – £nil).
Deferred tax liabilities
The following are the major deferred tax liabilities and assets recognised by the Company and movements thereon during the current and prior
reporting period:
At 1 January 2020
Credit to income
Charge to equity
Credit to other comprehensive income
At 1 January 2021
Charge to income
Charge to equity
Credit to other comprehensive income
As at 31 December 2021
Accelerated
tax
depreciation
£m
Retirement
benefits
£m
Share
based
payments
£m
(0.1)
(0.1)
–
–
(0.2)
(0.1)
–
–
(0.3)
8.2
1.0
–
(0.5)
8.7
2.9
6.4
–
18.0
(0.1)
–
–
–
(0.1)
(0.2)
(0.1)
–
(0.4)
Tax
Losses
£m
–
(1.5)
–
–
(1.5)
(1.6)
–
–
(3.1)
Total
£m
8.0
(0.6)
–
(0.5)
6.9
1.0
6.3
–
14.2
Deferred tax assets and liabilities are offset where the Company has a legally enforceable right to do so. The following is the analysis of the deferred
tax balances, after offset:
Deferred tax liabilities
Year ended
2021
£m
Year ended
2020
£m
14.2
6.9
At the Balance Sheet date, the Company has unused capital losses of £15.6m (2020 – £15.6m) available for offset against future capital gains.
No deferred tax asset has been recognised as no such capital gains are anticipated to arise in the foreseeable future.
50. Retirement benefit scheme
The Company’s defined benefit scheme is shown in Note 34 in the “UK plans funded” column.
51. Related party transactions
The remuneration of the Directors and Senior Managers, who are the key management personnel of the Group, is set out in the Remuneration Report
on pages 87 to 107. In 2021, the Company recognised share-based payment expense of £0.7m (2020 – £0.5m) in relation to the executive Directors.
The Group has related party relationships with a number of pension schemes. Transactions between the Group and these pension schemes are
disclosed in Note 34
Bloom Energy Corporation is a related party of the Group as Susan Brennan, an independent non-executive Director of the Group, was its Executive
Vice-President and Chief Operations Officer until resignation date of 5 August 2021.
In 2021, the Group sold £2.7m (2020 – £2.2m) of components to Bloom Energy Corporation. The gross receivable position as at 31 December 2021
was £0.4m (2020 – £0.4m).
52. Share-based payments
The Company has a number of share-based payment arrangements that existed during 2021, the details of which can be found in Note 33.
For the savings-related share option plan, no shares were exercised in 2021 or 2020. The options outstanding at 31 December 2021 had exercise
prices of 118.40p and 219.30p per share, and a weighted average remaining contractual life of 2.1 years. The options outstanding at 31 December
2020 had exercise prices of 219.30p and 207.20p per share, and a weighted average remaining contractual life of 1.7 years.
Share-based payment costs relating to subsidiaries are recharged from the Company.
162
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
FINANCIAL STATEMENTS FIVE-YEAR SUMMARY
Group income statement
Revenue
Continuing operations
Adjusted operating profit
Continuing operations
Amortisation of intangible assets from acquisitions
Goodwill impairment and write-off
Net restructuring income/(cost)
US class action lawsuits
Operating profit/(loss)
Investment income/finance costs, net (excluding lease liabilities)
Interest on lease liabilities
Net finance income/(cost) of retirement benefits
Corporate undertakings
Profit/(loss) before tax
Tax
Profit/(loss) for the year
Depreciation and amortisation of intangibles excluding right-of-use assets
Depreciation on right-of-use assets
Gross capital expenditure
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
Adjusted earnings/(loss) per share
Dividends in respect of years – per share
– value
Group Balance Sheet
Non-current assets excluding right-of-use assets
Right-of-use assets IFRS 16
Non-current assets
Net current assets
Non-current liabilities
Net assets
Net debt pre IFRS 16
Lease liabilities IFRS16
Net debt
Group cash flow
Net cash from operating activities
Corporate undertaking costs
Net Restructuring cash paid
US class action lawsuits
Interest received
Proceeds from disposal of property, plant and equipment
Purchase of property, plant and equipment – cash
Purchase of intangible assets
Free cash flow
Dividends paid
Disposal proceeds
Corporate undertaking costs
Net Restructuring cash paid
US class action lawsuits
Loan to joint venture
Purchase of shares held by employee benefit trust
Decrease in loans
Decrease in lease liabilities
Increase/(decrease) in cash and cash equivalents
2021
£m
2020
£m
2019
£m
2018
£m
2017
£m
658.7
733.6
1,110.7
1,082.1
1,023.4
6.1
–
–
4.4
–
10.5
(5.8)
(2.6)
0.4
21.2
23.7
0.5
24.2
38.3
9.5
21.3
5.82p
5.73p
0.17p
0.0p
–
463.5
67.4
530.9
110.3
(216.1)
425.1
(79.9)
(73.2)
(153.1)
27.0
4.8
0.9
2.3
0.1
0.2
(20.2)
(1.1)
14.0
–
51.7
(4.8)
(0.9)
(2.3)
–
–
(21.1)
(8.4)
28.2
3.7
(7.7)
(134.3)
(39.0)
–
(177.3)
(7.8)
(3.0)
0.9
(4.6)
(191.8)
33.3
(158.5)
51.4
10.2
26.8
(38.20)p
(38.20)p
(0.84)p
0.0p
–
482.7
72.5
555.2
89.2
(251.1)
393.3
(129.4)
(76.5)
(205.9)
48.9
4.6
15.2
3.9
0.2
0.5
(25.2)
(1.6)
46.5
–
0.4
(4.6)
(15.2)
(3.9)
–
–
(7.2)
(7.9)
8.1
89.4
(13.1)
–
(12.1)
(2.6)
61.6
(8.1)
(3.5)
0.7
(22.0)
28.7
0.5
29.2
57.5
10.2
64.8
7.04p
7.01p
16.17p
2.28p
9.5
651.4
82.3
733.7
102.5
(276.6)
559.6
(145.9)
(83.7)
(229.6)
115.9
3.4
2.9
–
0.2
0.7
(63.0)
(1.8)
58.3
(31.2)
2.9
(3.4)
(2.9)
–
–
(6.3)
(3.2)
(7.8)
6.4
91.6
(15.4)
–
–
(3.9)
72.3
(8.8)
–
0.2
–
63.7
(7.8)
55.9
56.9
–
56.3
12.81p
12.63p
16.08p
7.42p
30.9
662.0
–
662.0
131.0
(221.2)
571.8
(153.0)
–
(153.0)
100.7
–
–
–
0.4
0.5
(54.6)
(1.7)
45.3
(29.6)
–
–
–
–
0.5
(7.2)
(2.4)
(0.3)
6.3
82.6
(17.1)
–
–
–
65.5
(9.3)
–
(0.2)
(3.8)
52.2
8.1
60.3
57.9
–
54.8
14.39p
14.30p
14.39p
6.95p
29.0
624.3
–
624.3
66.0
(158.7)
531.6
(155.3)
–
(155.3)
110.9
–
–
–
0.4
1.8
(52.3)
(2.5)
58.3
(27.9)
0.4
–
–
–
0.3
(0.1)
(37.1)
(0.5)
(6.6)
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
163
GROUP UNDERTAKINGS
Operating Companies
Senior UK Limited
Lymington Precision Engineers
Co. Limited
Senior Flexonics Czech s.r.o.
Business Units
Senior Aerospace Bird
Bellows
Senior Aerospace BWT
Senior Flexonics Crumlin
Senior Aerospace Weston
Senior Aerospace Thermal
Engineering
Senior Flexonics Lymington
Country of Incorporation
England & Wales
59/61 High Street, Rickmansworth,
Hertordshire, WD3 1RH, UK
Locations
Congleton
Macclesfield
Crumlin
Colne
Royston
Lymington
England & Wales
Senior Flexonics Czech
Olomouc, Czech Republic Czech Republic
Senior Aerospace Ermeto SAS
Senior Aerospace Ermeto
Blois, France
Senior Calorstat SAS
Senior Aerospace Calorstat Dourdan, France
France
France
Senior Flexonics GmbH
Senior Flexonics Kassel
Kassel, Germany
Germany
Senior India Private Limited
Senior Flexonics New Delhi New Delhi, India
India
Senior Aerospace Bosman B.V.
Senior Aerospace Bosman
Rotterdam, Netherlands
Netherlands
Senior Operations (Canada)
Limited
Senior Flexonics SA (Pty)
Limited
Senior Flexonics Canada
Brampton, Ontario
Canada
Senior Flexonics Cape Town Cape Town, South Africa South Africa
Senior Operations LLC
Senior Aerospace AMT
Arlington, Washington
USA
Senior Aerospace Jet
Products
Senior Aerospace Ketema
Senior Aerospace Metal
Bellows
Senior Aerospace Damar
Senior Aerospace SSP
Senior Flexonics Bartlett
Senior Flexonics GA
Senior Flexonics Pathway
Senior Aerospace Steico
Industries
Senior Aerospace Thailand
San Diego, California
El Cajon, California
Sharon, Massachusetts
Monroe, Washington
Burbank, California
Bartlett, Illinois
Franklin, Wisconsin
New Braunfels, Texas &
Maine, Delaware
Oceanside, California
USA
Chonburi, Thailand
Thailand
Steico Industries, Inc.
Senior Aerospace (Thailand)
Limited
Upeca Aerotech Sdn Bhd
Senior Aerospace Upeca
Selangor, Malaysia
Malaysia
Upeca Flowtech Sdn Bhd
Senior Flexonics Upeca
Selangor, Malaysia
Malaysia
Upeca Engineering (Tianjin) Co LtdSenior Flexonics Upeca
Tianjin, China
China
(China)
Flexonics Limited
Lymington Precision Engineering
(LPE) Limited
Senior Aerospace Limited
164
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
England & Wales
England & Wales
England & Wales
59/61 High Street, Rickmansworth,
Hertordshire, WD3 1RH, UK
Olomouc, Průmyslová 733/9,
postcode 779 00, Czech Republic
Z.A Euro Val de Loire, 8 rue du
Clos Thomas, 41330 Fosse, France
11 Rue des Soufflets, 91410,
Dourdan, France
Frankfurter Strasse 199, 34121
Kassel, Germany
4th, Floor, Rectangle No.1,
Commercial Complex D-4,
Saket-New Delhi-110017, India
Bergen 6, 2993 LR Barendrecht,
Netherlands
134 Nelson Street West, Brampton,
Ontario, L6X 1C9, Canada
11 Thor Circle, Viking Place,
Thornton, Cape Town, 7460,
South Africa
Corporation Trust Center, 1209
Orange Street, Wilmington,
DE 19801, USA
818 West Seventh St., Ste. 930,
Los Angeles, CA 90017
789/115-116 Moo1, Pinthong
Industrial Estate, Sainhongkor-
Lamchabang Road, Tambol
Nhongkham, Amphur Sriracha,
Chon Buri Province 20230, Thailand
10th Floor, Menara Hap Seng,
No 1&3, Jalan P. Ramlee, 50250
W.P – Kuala Lumpur, Malaysia
10th Floor, Menara Hap Seng,
No 1&3, Jalan P. Ramlee, 50250
W.P – Kuala Lumpur, Malaysia
No. 12 QuanHe Road, Wu Qing
Development Area, Tianjin 301700,
PR China
59/61 High Street, Rickmansworth,
Hertordshire, WD3 1RH, UK
59/61 High Street, Rickmansworth,
Hertordshire, WD3 1RH, UK
59/61 High Street, Rickmansworth,
Hertordshire, WD3 1RH, UK
ADDITIONAL INFORMATION GROUP UNDERTAKINGS CONTINUED
Operating Companies
Business Units
Locations
Senior Americas One Limited
Senior Americas Two Limited
Senior Automotive Limited
Atlas Composites Limited
Senior Engineering Investments
Limited
Senior Five Limited
Senior Finance Four Limited
Senior Finance Six Limited
Senior Finance Seven Limited
Senior Flexonics Limited
Senior Trustee Limited
Senior France SAS
Senior Investments (Deutschland)
GmbH
Senior Holdings LLC
Senior Investments GmbH
Senior IP GmbH
Flexonics, Inc.
Senior US Holdings Inc
Upeca Technologies Sdn Bhd
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
France
Germany
USA
Switzerland
Switzerland
USA
USA
Malaysia
Country of Incorporation
59/61 High Street, Rickmansworth,
Hertordshire, WD3 1RH, UK
59/61 High Street, Rickmansworth,
Hertordshire, WD3 1RH, UK
59/61 High Street, Rickmansworth,
Hertordshire, WD3 1RH, UK
59/61 High Street, Rickmansworth,
Hertordshire, WD3 1RH, UK
59/61 High Street, Rickmansworth,
Hertordshire, WD3 1RH, UK
59/61 High Street, Rickmansworth,
Hertordshire, WD3 1RH, UK
59/61 High Street, Rickmansworth,
Hertordshire, WD3 1RH, UK
59/61 High Street, Rickmansworth,
Hertordshire, WD3 1RH, UK
59/61 High Street, Rickmansworth,
Hertordshire, WD3 1RH, UK
59/61 High Street, Rickmansworth,
Hertordshire, WD3 1RH, UK
59/61 High Street, Rickmansworth,
Hertordshire, WD3 1RH, UK
11 Rue des Soufflets, 91410,
Dourdan, France
Frankfurter Strasse 199, 34121
Kassel, Germany
Corporation Trust Center, 1209
Orange Street, Wilmington,
DE 19801, USA
Fronwagplatz 10, CH-8200,
Schaffhausen, Switzerland
Fronwagplatz 10, CH-8200,
Schaffhausen, Switzerland
Corporation Trust Center, 1209
Orange Street, Wilmington,
DE 19801, USA
Corporation Trust Center, 1209
Orange Street, Wilmington, DE
19801, USA
10th Floor, Menara Hap Seng,
No 1&3, Jalan P. Ramlee, 50250
W.P – Kuala Lumpur, Malaysia
Senior Aerospace and Flexonics Business Units in Mexico are operated by a third party under contract manufacturing agreements.
The Group has a 49% interest in Senior Flexonics Technologies (Wuhan) Limited, a jointly controlled entity incorporated in China.
All Group undertakings are wholly and directly owned by subsidiary undertakings of Senior plc, and in every case the principal country of operation
is the country of incorporation.
Senior Aerospace Bosman ceased trading in 2021, and Senior Flexonics Upeca, Malaysia ceased manufacturing in 2021.
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
165
ADDITIONAL SHAREHOLDER INFORMATION
Analysis of shareholders at 31 December 2021
By category
Corporate bodies
Other shareholders
By range of holdings
1 – 24,999
25,000 – 49,999
50,000 – 249,999
250,000 – 499,999
500,000 – 999,999
1,000,000 – and over
Operating (loss)/profit
Shareholders
Number
Shareholders
%
Issued Shares
Millons
Issued Shares
%
556
1,711
2,267
1,947
83
109
38
31
59
2,267
24.53
75.47
100.00
85.88
3.66
4.81
1.68
1.37
2.60
100.00
410.70
8.72
419.42
7.02
2.80
12.96
13.80
22.04
360.80
419.42
97.92
2.08
100.00
1.68
0.67
3.09
3.29
5.25
86.02
100.00
Trading profit and adjusted trading profit is operating loss/profit and adjusted operating profit respectively before share of joint venture profit.
See Note 9 for the derivation of adjusted operating profit. The number of shares in issue at 31 December 2021 was 419,418,082.
Share Registrars
All shareholder records are maintained by Equinti and all correspondence should be addressed to the Registrar, Senior plc at the Equniti address
shown on the inside back cover, quoting the reference number starting with 0228 detailed on your dividend vouchers. The registrar should be notified
regarding changes to name or address, loss of share certificate, or request for, or change to, a dividend mandate.
Equiniti provides a range of shareholder information on-line. Shareholders can check their holdings, update details and obtain practical help on
transferring shares at: www.shareview.co.uk.
Instead of payment by post to your registered address, dividends can be paid through the BACS system direct into a UK bank or building society
account, with the dividend voucher still sent to your registered address. If you wish to use this facility and have not previously applied, then please
apply direct to Equiniti and request a dividend mandate form. Shareholders who are currently receiving duplicate sets of Company mailings, as a result
of any inconsistency in name or address details, should write direct to Equiniti so holdings can be combined, if appropriate.
CREST Proxy Voting
CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so for the Annual General
Meeting to be held on 21 April 2022 and any adjournment(s) thereof by using the procedures described in the CREST manual. Further details relating
to voting via CREST may be found on the 2022 AGM Notice of Meeting and Form of Proxy.
166
SENIOR PLC ANNUAL REPORT AND ACCOUNTS 2021
ADDITIONAL INFORMATION OFFICERS AND ADVISERS
Secretary and registered office
Secretary and registered office
Andrew Bodenham
Senior plc
59/61 High Street, Rickmansworth, Hertfordshire WD3 1RH
Registered in England and Wales No. 00282772
Registrars
Equiniti
Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA
Auditor
KPMG LLP
15 Canada Square, London E14 5GL
Sharegift
If you have only a small number of shares which would cost more for
you to sell than they are worth, you may wish to consider donating
them to the charity ShareGift (Registered Charity 1052686) which
specialises in accepting such shares as donations. The ShareGift
Transfer Form may be obtained from Equiniti, the Company’s Registrars,
at www.shareview.co.uk. There are no implications for Capital Gains
Tax purposes (no gain or loss) on gifts of shares to charity and it is also
possible to obtain income tax relief. Further information about ShareGift
may be obtained on 020 7930 3737 or from www.ShareGift.org.
Solicitors
Slaughter and May
One Bunhill Row, London EC1Y 8YY
Principal UK clearing bankers
Lloyds Bank plc
25 Gresham Street, London EC2V 7HN
Financial advisers
Lazards & Co., Limited
50 Stratton Street, London W1J 8LL
Financial Public Relations
Finsbury Glover Hering
The Adelphi
1-11 John Adam Street
London WC2N 6HT
Joint corporate brokers
Jefferies International Limited
100 Bishopsgate
London EC2N 4JL
Credit Suisse International
One Cabot Square
London E14 4QJ
Design and production
Printed by Park Communications
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SENIOR PLC
59/61 High Street,
Rickmansworth,
Hertfordshire
WD3 1RH
United Kingdom
www.seniorplc.com
T +44 (0) 1923 775547